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Friday, February 05, 2010

My favorite fantasy schadenfreude lawsuit 


John Edwards is rapidly shaping up as one of the craziest tools ever to pretend to a major party nomination. Back when it was relevant rather than just salacious, this fact was, we now know, widely understood by insiders, including the reporters covering the Edwards campaign (see the campaign tell-all Game Change if you have doubts). Their silence allowed Edwards to bilk presumably good faith contributors of more than $35,000,000 in campaign contributions. Many of those contributors were tort lawyers.

Me, I'm wondering why none of these tools has thought to bring a class action case against not only Edwards but the major media corporations who knowingly and essentially aided and abetted his fraud. Please discuss the viability and/or humor of such a lawsuit while I fly back from Phoenix.

And, no, I do not believe that such a case ought to fly under the First Amendment.


7 Comments:

By Anonymous Just Because I'm Paranoid, at Fri Feb 05, 01:01:00 PM:

This is off-topic, but goes to our litigation war of all-against-all. I've written here before about Bank of America and Merrill.

Yesterday, New York Attorney General Andy Cuomo filed charges against BAC and its former CEO Ken Lewis and CFO Joseph Price. It made the cover of the WSJ today.

I've been following this because of my day job, and in particular because I happen to know Tim Mayopoulos -- BAC's former General Counsel. Tim was fired for no good reason -- and without warning -- the day after the BAC-MER shareholder vote. I haven't seen or talked to Tim in years, but he's a good guy and shouldn't have been played this way.

I only honed in on the middle of Cuomo's complaint -- the part that deals with Tim's firing. But here's an interesting takeaway from Cuomo's complaint: current BAC CEO Brian Moynihan isn't clear of this.

Tim had played along with the initial group consensus that MER losses of up to $7 billion needn't be disclosed, but late in the day on Dec 9 he learned that MER losses were way over this threshold. He sought a meeting with CFO Price, a meeting that never happened. Instead, the next day Tim was shot and immediately escorted from the building. Cuomo included excerpts of Tim's testimony in his complaint ... "Nearly a year later, I still do not know why I was terminated, who was involved in the decision to do so, or what their reasons or motivations were."

The complaint names BAC, and Lewis and Price individually. It includes Martin Act charges, which gives the NYAG a license to kill. Spitzer abused his Martin Act powers shamelessly; we'll see about Cuomo. Cuomo is working with the TARP Inspector General on this, which means he's working with Obama & Co on this.

Cuomo's theory of the case is that BAC management manipulated the federal government into giving it a bigger, more favorable TARP bailout by threatening to walk away from the MER acquisition. Thus, in Cuomo's view, Hank Paulson didn't put a gun to Ken Lewis's head -- instead, it was Ken Lewis who put a gun to Hank Paulson's head in order to steal taxpayer money.

Interestingly, Cuomo included details in the complaint about Moynihan's replacing Tim that he didn't need to, including the following:

"Moynihan acted as general counsel of BoA for approximately six weeks, a key portion of which period was taken up with the Bank’s efforts to secure government assistance by threatening to invoke [material adverse change]."

It's only a short step to allege that Moynihan was part of the Lewis-Price conspiracy to rip off the taxpayer. I don't know that Cuomo will play this card, but he's got Moynihan by the balls ... Which means that Obama has Moynihan by the balls.

The wild card in the deck is SDNY Judge Rakoff. The SEC is now trying to get Rakoff to sign off on a new and improved SEC settlement with BAC -- now with Lemon! ... and thus take the Rakoff card out of the deck. Otherwise, Rakoff could be running a trial in a few months. If there's a trial and the SEC doesn't ask the right questions, you can bet Rakoff will from the bench.

The plaintiffs lawyers are big winners here. With all these charges in the public domain, there's no way that the 10b-5 claims get dismissed early -- which otherwise might have happened. The theoretical damages here are huge. BAC's only defense may be "loss causation." For law nerds, this could be interesting as BAC paid in its stock, which was also going through a sharp decline. If you measure valuations at closing -- not signing, BAC got MER for something like $5 billion in BAC stock. Years from now this may actually look like a steal.  

By Anonymous Anonymous, at Fri Feb 05, 02:41:00 PM:

I'm mid way through Game Change (Rielle has already had her baby and Edwards is still hoping for the AG gig) and while it's very clear that most everyone on his campaign knew about the affair (several resigned because oof it), I don't recall reading that reporters or even the authors were aware at the time.

Halperin/Heilemann's account is pieced together after interviewing campaign manager, staffers, Young, etc. That said, one would think it wouldn't take much to figure out if the Missus is screaming at JohnBoy at every whistle stop that something was up....  

By Blogger JPMcT, at Fri Feb 05, 04:48:00 PM:

From time to time I've been asked to give expert testimony in support of other physicians being sued in medical tort cases. As such, I've been exposed to a number of high profile tort attorneys. I have yet to walk away from such meetings without the sensation that I have just met the biggest ass of my life...yet they continue to outshine each other. By the way, I have yet to be on the losing side of these endeavors, so my opinion is not colored by defeat.

Edwards was fond of "channeling" dead babies during court sessions for the emotional imnpact on the jury. I don't know where they got their jury pools from, since I would react to this like a fart in church, but I suspect that the good Mr. Edwards ran with the herd of jackasses.

I only mention this since I suspect most tort attorneys are too arrogant to admit that Edwards duped them.

If there were such a thing as a "no-class" action suit, they would probably feel more comfortable.  

By Blogger Georgfelis, at Fri Feb 05, 08:14:00 PM:

"...why none of these tools has thought to bring a class action case..."

Because anybody bringing a case on this would be painting a huge "I was wrong" sign on their backs, and people of this particular bent would rather be roasted over an open peat fire than admit error. In fact, I would be willing to bet most of them *continued* to donate money to Edwards and his pals even after they found out, because to stop the funding would be equivalent to admitting they were wrong too.

I believe the word I was looking for was Hubris? Or the phrase "A fool and his money..."  

By Blogger SR, at Fri Feb 05, 11:10:00 PM:

No matter what you think of him. remember GW Bush saved the country from Kerry and Edwards.  

By Anonymous Anonymous, at Sat Feb 06, 12:10:00 AM:

Understand your sentiment about the press, but your "belief" about the First Amendment reflects a pretty piss poor thought process. Forget about extant law, you can't seriously want a regime like that. You can't even describe it in a sensible way (the reading of the Amendment that would permit this kind of lawsuit to go forward -- what's the tort claim anyway??).

No need to make that point. Better just not to buy their newspapers.  

By Blogger JPMcT, at Sat Feb 06, 09:41:00 AM:

"No matter what you think of him. remember GW Bush saved the country from Kerry and Edwards"

Does that balance the fact that his inability to articulate his policies with the American public...or respond to ridiculous accusations by the American "media"...ultimately gave us Obama???  

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