According to reports, the SEC asked the Justice Department’s Office of the Solicitor General to file an amicus curiae (friend of the court) brief to U.S. Supreme Court in support of the Enron investors’ position in a seminal case involving “scheme liability” under a key provision of the federal securities law.
However, lawyers for the Justice Department failed to honor the SEC’s request. After the deadline for such briefs was missed, a spokesman for the U. S. Solicitor General’s Office confirmed that the brief was not filed, while declining to say “whether or when we would file something in the future.”
The case, which has wound its way to the U.S. Supreme Court, was filed against Wall Street banks and brokerage firms for their alleged roles in assisting Enron to defraud its shareholders. Trial was eminent in a Houston Federal Court when a Court of Appeals in New Orleans intervened and said the Securities Exchange Act does not allow such claims. (Congress has forbid all class action claims by investors except under the federal securities laws.)
A high-profile lawyer for the Enron Shareholders publically called-out the SEC Chairman, who is a former U.S. Congressman and political appointee, to intervene in the case to protect investors. The SEC then suprised some by indicated it would take the investor’s side before the Supreme Court. However, Wall Street got its way in the end, as no action was taken to assist the victims.
Others have filed amicus briefs on behalf of the Enron Victims, including The North American Securities Administrators Association, an organization of state securities regulators, warning that letting Wall Street firms off-the-hook for their role in scandals such as the Enron debacle will endorse their assistance of other companies to defraud investors.
The SEC said it had no comment on OSG’s decision not to file a brief supporting the plaintiff investors’ position. It appears that the SEC and Justice Department may be operating as a “tag team” in protecting Wall Street from liability for securities fraud rather than protecting investors.
Shepherd Smith and Edwards is a securities law firm which represents investors nationwide in claims against investment firms. To learn whether our firm can assist you or your firm, contact us to arrange a free confidential consultation with one of our attorneys.