Frank Critical Of Bush On Suits
Thursday, June 14, 2007
The chairman of the House Financial Services Committee yesterday said he was "troubled" by disclosures that President Bush had expressed policy views that prompted administration lawyers not to file court briefs supporting investors.
Rep. Barney Frank (D-Mass.) said the Bush administration was wrong to allow concerns about class-action lawsuits to override efforts this week by the Securities and Exchange Commission to file a brief in an upcoming Supreme Court case.
"You've got the president making economic arguments," Frank said in an interview yesterday. "Those aren't legal arguments. . . . I think they're setting a bad precedent."
U.S. Solicitor General Paul D. Clement rejected a plea from the SEC, an independent agency led by three Republicans and two Democrats, to support investors who sue third parties for helping clients commit fraud but who do not make false statements in the process.
SEC Chairman Christopher Cox, a former member of the Republican House leadership, sided with agency Democrats in a 3 to 2 vote to support plaintiffs in the case. But the SEC lacks the authority to share its position directly with the Supreme Court. The federal government speaks with one voice, through the solicitor general.
White House aides said late Tuesday that President Bush had expressed discomfort with allowing shareholders and plaintiffs' lawyers to sue third parties such as bankers, lawyers and accountants, preferring that prosecutors and the SEC handle such cases.
In a June 1 letter, a Treasury Department lawyer urged Clement to set out a "clear, bright line standard" to avoid uncertainty over lawsuits the department says pose significant risks for U.S. businesses. Language in the letter suggested that at least once in the deliberations, the solicitor general contemplated filing a brief on behalf of plaintiffs.
But the Monday deadline for action passed without word from Clement. Earlier that day, Bush expressed concerns about the nature of the lawsuit, government officials said Tuesday.
The Supreme Court case pivots on whether Charter Communications investors can proceed with a lawsuit against two business partners that allegedly helped Charter hide financial problems. But it is being closely watched for the precedent it could set over a stalled case involving Enron shareholders, who are seeking to recover some of their losses from Merrill Lynch and Barclays.
AFL-CIO President John J. Sweeney yesterday called the administration's inaction "among the most outrageous events in the long and sordid history of the Enron scandal."
The battle is not over. The U.S. Chamber of Commerce yesterday called on the administration to file court briefs on behalf of business in the Supreme Court case. Those filings are due within a month.
"Allowing private lawsuits against business partners of companies accused of securities fraud will impair economic competitiveness and discourage future investments in U.S. markets," said Robin S. Conrad, executive vice president of the National Chamber Litigation Center.