Why Isn’t the Justice Department Bringing Treasury-Rigging Charges Against Wall Street?

By Pam Martens and Russ Martens: April 24, 2018

Scales of JusticeThe U.S. Department of Justice has had an ongoing investigation into the potential rigging of the U.S. Treasury market by big banks on Wall Street for the past three years according to a series of past media reports. And yet, no formal charges have been brought. Lots of Wall Street watchers are wondering why – especially since private law firms have brought very specific charges in the matter into Federal court.

There are only so many times the Justice Department can charge the largest Wall Street banks with felony counts for rigging markets before the public catches on that it’s a feature not a bug of their business model. Continuous rigging charges could lead to growing public demands and newspaper editorials to break up these serially-charged behemoths at a time when members of Congress – who depend on the largess of Wall Street to run their political campaigns – don’t want to anger their major donors by endorsing legislation to break up the banks.

Two of the five largest U.S. banks by assets, JPMorgan Chase and Citigroup, already have four criminal felony counts between them. Two of JPMorgan Chase’s felony counts stem from how it handled Ponzi-king Bernie Madoff’s main business bank account for decades and failed to report highly suspicious activity as it is required to do under Federal law. Those two counts came in January 2014. The very next year, both JPMorgan Chase and a Citigroup unit, Citicorp, were slapped with one felony count each for their involvement in the rigging of foreign currency markets. The banks have admitted to all of the felony charges. Two foreign banks that are also active on Wall Street, Barclays PLC and the Royal Bank of Scotland (RBS), also pleaded guilty and received one felony count each in the foreign currency matter that was announced on May 20, 2015. On the same date, UBS, another mega Wall Street bank, pleaded guilty to rigging the interest rate benchmark known as Libor.

Unknown to most of the general public is the fact that these same mega banks on Wall Street that are repeatedly charged with abusing their customers and the public interest also play a critical role in helping the U.S. government finance its debt and help the Federal Reserve in carrying out its monetary policy. The banks are known as “Primary Dealers” and this is how the New York Fed describes their role:

“Primary dealers serve as trading counterparties of the New York Fed in its implementation of monetary policy. This role includes the obligations to: (i) participate consistently in open market operations to carry out U.S. monetary policy pursuant to the direction of the Federal Open Market Committee (FOMC); and (ii) provide the New York Fed’s trading desk with market information and analysis helpful in the formulation and implementation of monetary policy. Primary dealers are also required to participate in all auctions of U.S. government debt and to make reasonable markets for the New York Fed when it transacts on behalf of its foreign official account-holders.”

In other words, serial lawbreakers constitute the infrastructure of the U.S. financial system. One might be inclined to think of it as prison guards overseeing a work party of inmates on a big road infrastructure project. The difference being, of course, that the titans of these Wall Street banks have never seen the inside of a jail cell – even after they caused the greatest financial collapse in 2008 since the Great Depression.

Adding to the problem is the fact that these mega banks have been allowed to gobble up their peer banks over the years, leading to a drastic decline in the number of Primary Dealers that can bid at U.S. Treasury auctions. In 1988 there were 46 primary dealers. By 1999, there were only 30. As of November 2017, according to the New York Fed, there were only 23.

As the amount of new Treasury debt issuance has grown as a result of spiraling deficits, the number of big Primary Dealers has shrunk. This makes the Justice Department and the Treasury Department extremely fearful of indicting a major Primary Dealer because convicted felons cannot engage in Treasury auction contracts. Instead, the Justice Department simply hands out deferred prosecution agreements, putting the banks on three-year probation with a DOJ incentive not to bring further felony counts and deferred prosecution agreements until the three-year probation has lapsed. This has set new milestones in moral hazard.

On May 3 of last year, Kevin Dugan of the New York Post reported that “The Justice Department’s investigation into Wall Street’s rigging of the $14 trillion Treasury market is zeroing in on Goldman Sachs….” Dugan noted that “Goldman Sachs won almost all auctions for US Treasury bonds from 2007 to about 2011, a remarkable winning streak that came despite safeguards established by the Treasury to keep bidding competitive, sources familiar with the investigation said.”

Dugan also indicated that the government had “chats and emails believed to show Goldman traders sharing sensitive price information with traders at other banks — a sign of possible price fixing and collusion….” Goldman Sachs is a Primary Dealer.

Also in May of last year, Tom Schoenberg of Bloomberg News reported that four other banks had received subpoenas the prior month seeking information in the Treasury market probe. Schoenberg named UBS Group, BNP Paribas, Royal Bank of Scotland Group and Morgan Stanley as recipients of the subpoenas. All four are parent corporations of Primary Dealer units.

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Why Did a Wall Street Plaintiff’s Law Firm File the DNC RICO Lawsuit Against Trump’s Campaign

By Pam Martens and Russ Martens: April 23, 2018

Michael Eisenkraft, Law Partner at Cohen Milstein

Michael Eisenkraft, Law Partner at Cohen Milstein

If there’s any plaintiff’s law firm in America that should know racketeering when it sees it, it’s Cohen Milstein. It’s sued the major Wall Street banks repeatedly with a solid win rate for colluding to rig pretty much anything that trades. On Friday, in the same Federal District Court where its Wall Street actions are litigated, the Southern District of New York (SDNY), it filed its bombshell RICO lawsuit on behalf of the Democratic National Committee (DNC).

The lawsuit does not name President Donald Trump as a defendant but it does name prominent members of his presidential campaign, including his son, Donald Jr., and son-in-law, Jared Kushner. Trump’s former campaign chairman, Paul Manafort, and advisers, Roger Stone and George Papadopoulos are also named, as are the Russian intelligence service, Russian Federation, several Russian operatives, Julian Assange and WikiLeaks.

The lawsuit charges that “In 2015 and 2016, Russian intelligence services hacked into the DNC’s computers, penetrated its phone systems, and exfiltrated tens of thousands of documents and emails. Russia then used this stolen information to advance its own interests: destabilizing the U.S. political environment, denigrating the Democratic presidential nominee, and supporting the campaign of Donald J. Trump (‘Trump’), whose policies would benefit the Kremlin.”

The complaint describes the “conspiracy” as “an act of previously unimaginable treachery: the campaign of the presidential nominee of a major party in league with a hostile foreign power to bolster its own chance to win the presidency,” adding that WikiLeaks “disseminated the information at times when it would best suit the Trump campaign.”

Why Cohen Milstein would take this case is curious. It is currently involved in major class action cases against Wall Street banks, as is its lead attorney for the DNC lawsuit, Michael B. Eisenkraft. One of those cases is massive. It alleges that major Wall Street firms like Citigroup, Goldman Sachs, JPMorgan, Merrill Lynch, Morgan Stanley and numerous others, rigged the $13 trillion U.S. Treasury market in order to increase their own profits. Eisenkraft is also involved in the Interest Rate Swaps Antitrust Litigation where he is the court-appointed co-lead counsel in an action that alleges that Wall Street investment banks conspired to prevent an alternative market for interest rate swaps from developing. Another one of his big cases is the Stock Lending Antitrust Litigation that charges major Wall Street banks with conspiring to prevent the stock lending market from developing and maturing by boycotting other platforms designed to increase transparency and reduce costs.

Many of the Wall Street banks named in the current lawsuits have already paid large fines to regulators over charges they rigged other markets or market benchmarks. Citigroup and JPMorgan Chase both pled guilty to felony charges by the U.S. Justice Department in May 2015 for their involvement in the rigging of foreign currency markets.

Just last month, Cohen Milstein and Eisenkraft announced a lawsuit claiming that unnamed traders have rigged VIX futures and options by manipulating the process in which the VIX contract’s settlement price was calculated. The lawsuit alleges this was done by trading in Standard and Poor’s 500 Index options. VIX is the so-called “fear gauge” on Wall Street, a key barometer used to measure volatility.

Cohen Milstein is not just putting one of its key Securities Litigation law partners on this case. Joseph M. Sellers, the Chair of the law firm’s Executive Committee, is also listed on the lawsuit. Another law partner on the suit is Geoffrey Graber, a member of Cohen Milstein’s Consumer Protection group as well as a lawyer who represents whistleblowers under the False Claims Act. Graber may know a lot more about data breaches than the average lawyer – he is a key lawyer for plaintiffs in the massive data breach at Anthem Inc. that “compromised the personal identification and health information of more than 80 million customers of the health care company,” according to the law firm. That case received preliminary court approval for a $115 million settlement in August of last year.

Two Cohen Milstein Associates are also listed on the DNC lawsuit: Julia Horwitz and Alison Deich.

The DNC may have concerns about exactly how much justice and/or transparency it is going to obtain under the criminal probe into the same matter by Special Counsel Robert Mueller and wants its own civil RICO action to move forward in case the former turns out to be a dud investigation.

As Wall Street On Parade previously reported on April 10, there are some serious conflicts among prosecutors overseeing portions of the case in the Southern District of New York. We wrote:

“The man currently in charge of the U.S. Attorney’s Office for the Southern District of New York has not been vetted or confirmed by the U.S. Senate. He’s serving as an interim U.S. Attorney. His name is Geoffrey Berman and he is a Trump supporter. Federal Election Commission records show that he donated $5400 to Trump’s campaign on July 28, 2016. At the time of his appointment, Berman was also a fellow shareholder and law partner of Rudy Giuliani at the giant law firm, Greenberg Traurig. Berman had worked there for more than a decade. Giuliani is a longstanding Trump ally and loyalist and a former head himself of the U.S. Attorney’s Office for the SDNY.

“Two days after Berman was named interim U.S. Attorney for the SDNY, Berman named Robert Khuzami to be his Deputy U.S. Attorney for that jurisdiction. Khuzami was General Counsel to Deutsche Bank-Americas from January 2002 to February 2009. Deutsche Bank has been the major lender to Trump’s businesses for decades, even as other major Wall Street banks refused further lending to him. In January of last year, Deutsche Bank was charged with laundering billions of dollars out of Russia and paid approximately $630 million in fines. Mueller is probing the Trump campaign’s ties to the Russian government and Russian money.

“In December the German language newspaper, Handelsblatt, reported that Special Counsel Robert Mueller has subpoenaed bank records from Deutsche Bank relating to President Trump and his family members. Handelsblatt writes that ‘The former real-estate baron has done billions of dollars’ worth of business with Deutsche Bank over the past two decades, and First Lady Melania, daughter Ivanka and son-in-law Jared Kushner are also clients.’ ”

Last week, the swamp of conflicts got a lot murkier. It was announced that Giuliani, also hailing from Greenberg Traurig, is joining Trump’s legal defense team. That news comes despite the fact that Giuliani played an active role in Trump’s campaign. (It is well established case law that an attorney can’t represent a client in which he himself is a witness in the case.)

Another obstacle for Giuliani is that Cambridge Analytica whistleblower Christopher Wylie named Giuliani’s former law firm, Bracewell & Giuliani, as U.S. campaign law advisor to Cambridge Analytica, the data mining firm that is alleged to have improperly harvested the personal information on more than 87 million Facebook users in order to benefit the Trump campaign.

Eric Holder, After Failing to Prosecute Wall Street, May Run for President

By Pam Martens and Russ Martens: April 20, 2018

U.S. Attorney General Eric Holder Testifying on High Frequency Trading Before the House Appropriations Committee on April 4, 2014

U.S. Attorney General Eric Holder Testifying on High Frequency Trading Before the House Appropriations Committee on April 4, 2014

Make no mistake about it, the Big Law firms that played a major role in the Wall Street corruption that led to the financial crash of 2008 and have been burying corporate crimes through their crony ties to Washington for decades, are desperate to put their own man in the White House in 2020.

On Tuesday, former Attorney General, Eric Holder, who headed the U.S. Department of Justice in the Obama administration, appeared on the MSNBC program, “All In with Chris Hayes.” Holder told Hayes that he was considering a run for the President of the United States in 2020 but had not made a final decision. (See video below.) Obviously, if Holder ran, it would be as a Democrat, something that is certain to enrage the progressive wing of the party.

Holder effectively transplanted his pals from his law firm, Covington & Burling, into pivotal spots at the Justice Department during his reign there from 2009 to 2015. And exactly who is Covington & Burling? As we reported in 2012, this is the very law firm that was called out in the a Federal court decision for actively conspiring with Big Tobacco to hide the dangerous health effects of second hand smoke from the public for decades.

So how did a law partner from a law firm with a history like that get picked by Obama to head the highest law enforcement agency in the land? In October and November of 2016 WikiLeaks released emails that had been provided to it by an unnamed source who had hacked into the email account of John Podesta. The emails pertained to Podesta’s work as Campaign Chairman for Hillary Clinton in 2016 as well as in 2008 when Podesta was Co-Chairman of President Obama’s Transition Team.

Wall Street On Parade was one of the few news outlets that wrote about the bombshell emails that came from Michael Froman, an executive of the serially charged Wall Street bank, Citigroup.

The emails showed that President Obama, using the email address of bobama@ameritech.net, was communicating directly with Froman at Citigroup as the bank was collapsing and receiving unprecedented amounts of secret money from the Federal Reserve as well as publicly disclosed vast sums of bailout money from the government.

As the discredited bank was collapsing, Froman was feeding Obama lists of recommended appointments to his cabinet as well as recommendations for employees on lower rungs of the ladder.

In an email from Froman dated October 6, 2008, with Froman using his Citigroup email address of fromanm@citi.com, Hillary Clinton shows up on Froman’s list for either Secretary of State or head of the U.S. Department of Health and Human Services (HHS). In a separate list attached to the email, Eric Holder was recommended for U.S. Attorney General at the Department of Justice or as White House Counsel. (See the email and the attachments here.)

In less than a month after Obama’s election as President on November 4, 2008, Obama had nominated Clinton to be his Secretary of State and Holder as his Attorney General.

Citigroup’s taxpayer bailout was the largest in not just U.S. history – but the largest in global banking history. Citigroup received $45 billion in equity from the U.S. Treasury; a government guarantee on $300 billion of Citigroup’s dubious assets; the Federal Deposit Insurance Corporation (FDIC) guaranteed $5.75 billion of its senior unsecured debt and $26 billion of its commercial paper and interbank deposits; and the Federal Reserve secretly funneled $2.5 trillion in almost zero-interest rate loans to units of Citigroup between 2007 and 2010. This bailout was done despite Citigroup’s long history of being a recidivist lawbreaker.

To head up the criminal division of the Justice Department, Holder named his law partner at Covington & Burling, Lanny Breuer. (Dan Suleiman, deputy chief of staff and counselor to Lanny Breuer, also came from Covington & Burling. Their former law partner at the firm, John Dugan, a former bank lobbyist, headed the Office of the Comptroller of the Currency (OCC), which regulates all national banks, from August 4, 2005 through August 14, 2010 – the years in which Wall Street banks were allowed to transform themselves into gambling casinos and blow themselves up.)

On January 22, 2013 the PBS program, Frontline, dropped a bombshell on the behind the scenes workings at the Justice Department, which had failed to prosecute any top executive at a Wall Street bank for the crimes that led to the 2008 financial collapse.

The relevant part of the transcript reads as follows:

NARRATOR: Frontline spoke to two former high-level Justice Department prosecutors who served in the Criminal Division under Lanny Breuer. In their opinion, Breuer was overly fearful of losing.

MARTIN SMITH (Frontline Interviewer and Producer): We spoke to a couple of sources from within the Criminal Division, and they reported that when it came to Wall Street, there were no investigations going on. There were no subpoenas, no document reviews, no wiretaps.

LANNY BREUER: Well, I don’t know who you spoke with because we have looked hard at the very types of matters that you’re talking about.

MARTIN SMITH: These sources said that at the weekly indictment approval meetings that there was no case ever mentioned that was even close to indicting Wall Street for financial crimes.

Holder, Breuer and Suleiman are back in their high-paying, comfortable jobs at Covington & Burling. According to the law firm’s web site, Holder “advises clients on complex investigations and litigation matters, including those that are international in scope and involve significant regulatory enforcement issues and substantial reputational concerns.”

In July 2015, David Dayen, writing for Salon, reported the following:

“Last year, Holder bought a condo 300 feet from the firm’s headquarters. The National Law Journal headlined the news, ‘Holder’s Return to Covington Was Six Years in the Making,’ as if acting as the nation’s top law enforcement officer was a temp gig. They even kept an 11th-floor corner office empty for his return.

“If we had a more aggressive media, this would be an enormous scandal, more than the decamping of former Obama Administration officials to places like Uber and Amazon. That’s because practically no law firm has done more to protect Wall Street executives from the consequences of their criminal activities than Covington & Burling.  Their roster of clients includes every mega-bank in America: JPMorgan Chase, Wells Fargo, Citigroup, Bank of America. Yet Holder has joined several of his ex-employees there, creating a shadow Justice Department and an unquestionable conflict of interest. In fact, given the pathetic fashion in which DOJ limited punishment for those who caused the greatest economic meltdown in 80 years, Holder’s new job looks a lot like his old job.”

Breuer has gotten a nice promotion, now serving as Vice Chair of the law firm. Among his specialties, notes Covington, is “helping clients navigate financial fraud investigations.” Navigating financial fraud investigations is always so much easier for Wall Street banks if there are “no subpoenas, no document reviews, no wiretaps” as Frontline reported was how Breuer ran the criminal division’s oversight of Wall Street during his tenure there.

Elizabeth Warren Says U.S. and Wall Street Conspired Against Wealth Building by Blacks; Remarks Are Censored by Big Media

By Pam Martens and Russ Martens: April 19, 2018

Senator Elizabeth Warren Speaking at Howard University, April 16, 2018

Senator Elizabeth Warren Speaking at Howard University, April 16, 2018

If you get your business news from the Wall Street Journal or Bloomberg News or the New York Times or Reuters or the Financial Times or CNBC, chances are you did not hear about a critically important symposium that was held on Monday on the dangers that Wall Street’s biggest banks continue to pose to the U.S. economy and, in particular, to communities of color.

Adding to the mystery of how every major business news outlet could simultaneously decide to skip the event is that it was headlined by two famous players in the banking debate, Senator Elizabeth Warren and Neel Kashkari, President of the Federal Reserve Bank of Minneapolis.

The symposium on “Too Big to Fail” was hosted by Howard University’s Department of Economics and held at the campus which is located in Washington, DC – where there is certainly no shortage of reporters. When a critical message goes unreported by all major media, it tends to send the message to the speakers —  “shut up and move on.”

It is noteworthy that Howard University is a predominantly black university and the message delivered by Senator Warren was on how communities of color had been specifically targeted for wealth stripping by Wall Street through devious means in the leadup to the financial crash of 2008. This was preceded by a U.S. government conspiracy against them from 1934 to 1968, said Warren.

Warren told the audience that within two years of the onset of the financial crash of 2008, 8.8 million American workers had lost their jobs and within three years more than 4 million homes had been lost to foreclosure. “The financial crisis wiped out as much as $14 trillion in household wealth,” Warren told the crowd.

But, as has been well documented by academic studies, Warren noted that “the losses were not evenly distributed.” Warren said:

“Before the crisis, big financial institutions specifically targeted communities of color with mortgages that were full of tricks and traps, stripping wealth from families and their communities. And when the financial crisis came, those same communities of color got hit a second time with some neighborhoods nearly destroyed by the concentration of foreclosures.”

Warren put numbers to the disparity in wealth destruction, stating that “On average, net worth of white families fell by 31 percent as a result of the crisis while black families lost 40 percent of their wealth.”

Warren’s key point to the audience was that the recently passed Senate bill to roll back key provisions of the Dodd-Frank financial reform legislation poses a serious threat that communities of color will once again be targeted by Wall Street for another round of wealth decimation. Warren said:

“There is a long and shameful history in this country of discrimination against African Americans when they try to buy homes. From 1934 to 1968, the Federal Housing Administration led the charge. In a largely segregated America, FHA actively discriminated against black families by refusing to insure mortgages for qualified borrowers in communities of color, while helping white families finance their plans to achieve the American dream.

“Its policy wasn’t a secret. It wasn’t the product of a handful of racist government officials. Nope. It was the official policy of the United States government until 1968. That’s in my lifetime. And because the Federal government had set the standard, private lenders enthusiastically followed Washington’s lead.”

Warren cited a study in the Boston Globe which found that “the median net worth of white families in Boston is $247,000” while the median net worth for a black family “is $8.” Warren said “That’s something that all Americans, regardless of race, should be ashamed of.”

Instead of allowing Congress to roll back safeguards against Wall Street’s abusive practices, Warren said that last month she introduced new legislation that would strengthen regulations. The bill is called the “Ending Too Big to Jail Act” and would create a permanent law enforcement unit to investigate crimes at financial institutions, require senior executives at banks with $10 billion or more in assets to certify annually that they have conducted due diligence and found no criminal conduct or civil fraud within the financial institution, and it would mandate court oversight of deferred prosecution agreements – a serial practice by the U.S. Department of Justice since the crash of 2008.

Neel Kashkari, President of the Minneapolis Fed, Speaking at Howard University, April 16, 2018

Neel Kashkari, President of the Minneapolis Fed, Speaking at Howard University, April 16, 2018

Warren said she has other ideas for strengthening the financial system, including re-enacting the Glass-Steagall Act which would separate banks holding insured deposits from the high-risk investment banks and enhancing oversight of derivative markets.

Kashkari provided the opening remarks at the symposium. He said “We are forgetting the lessons of the 2008 crisis.” He noted that the big banks are still highly leveraged and need to raise more equity rather than relying so heavily on debt.

The pain of the financial crash has faded from the memories of Wall Street executives because of the following, said Kashkari: “The shareholders got bailed out. The boards of directors got bailed out. Management got bailed out. So from their perspective, there was no crisis.”

Elizabeth Warren Gets Wall Street Runaround on #MeToo Probe

By Pam Martens: April 17, 2018

Senator Elizabeth Warren Questions SEC Chair Jay Clayton During Senate Banking Committee Hearing, September 26, 2017

Senator Elizabeth Warren 

As women in careers as disparate as Hollywood movie stars, television news anchors and members of Congress have fueled the #MeToo movement and spoken out against America’s workplace culture that tolerates sexual harassment and assault in the workplace, the silence from women on Wall Street has been deafening.

Some reporters who have written about the silence have speculated that Wall Street has cleaned up its act, owing to the big class action lawsuits that were brought in the 1990s against some of the largest and oldest Wall Street brokerage firms. (See my Editor’s Note below.) Wall Street women’s detailed court complaints in the 90s described lewd acts during the workday (such as the hiring of strippers) or at company-sanctioned holiday parties (like having a camera shoved under a skirt to take a picture). There was also the endless degradation of women on Wall Street through sexual objectification in front of peers. One female broker was described by her male colleagues as “slits and tits” while the legal defense strategy on Wall Street was internally known as the “nuts or sluts” defense, that is, portray the complaining woman as a nut or a slut.

Tragically, the silence now coming from Wall Street women is not the result of Wall Street taking these lawsuits seriously. Instead, Wall Street has simply beefed up its legal enforcement of non-disparagement agreements and prohibits employees from speaking with the press. But more ominously, Wall Street makes mandatory arbitration agreements a condition of employment. Mandatory arbitration, run by the deeply conflicted self-regulator of Wall Street, FINRA, is more akin to a kangaroo court than the nation’s courts. Feminist Gloria Steinem called the system “McJustice.” Arbitrators are allowed to dispense with legal precedent, case law and place severe restrictions on discovery. The press and the public are not allowed to attend the arbitration hearings. Appeals to a court of law are next to impossible unless there is a mountain of evidence showing fraud in the proceeding.

Today, Bloomberg News is reporting that Senator Elizabeth Warren received a response to her inquiry to FINRA regarding the prevalence of sexual harassment on Wall Street today. The self-regulator reported that it had reviewed 1.1 million termination notices over an eight-year period between 2010 and 2018. It found just four brokerage terminations that reference sexual harassment or suggest it might have been the cause of termination.

We tried something a little different here at Wall Street On Parade. FINRA makes the rulings of its mandatory arbitration tribunals public. Although the skimpy decisions compare to a Federal judge’s reasoned opinions in much the way that a Matchbox toy car relates to a John Deere tractor, we used the search word “sexual” (short for “sexual harassment”) and combed through cases dating back to 1989. There were a preposterously few cases showing the term “sexual harassment” for a span of more than a quarter century on Wall Street, suggesting that the arbitration chair may have been deterred from using this term by one of Wall Street’s many unwritten rules.

We did, however, stumble upon the arbitration decision in the FINRA archives for a claimant by the name of Helen L. Walters. This case was filed with the NASD’s arbitration system (the predecessor to FINRA) on February 5, 1991. Wall Street’s legions of big law firms have argued before Appellate Courts and even the U.S. Supreme Court that arbitration is fair, fast and cheap. But Walters’ case wasn’t decided until October 8, 1992, more than a year and a half after it was filed. Unlike a description of the complaint that one would find in the Federal Court system, the arbitrators offered one single sentence to describe Walters’ complaint. It read: “Registered representative (former employee) alleges member firm and registered representative engaged in sexual harassment.”

The arbitrators found against Walters and dismissed her claims entirely with no explanation as to how they reached this decision. That would have been all the public ever knew about the living hell that Helen Walters had endured on Wall Street were it not for a Wall Street Journal reporter named Margaret Jacobs. On June 9, 1994, Jacobs reported the following to stunned readers across the country:

“Helen L. Walters says her boss called her a ‘hooker,’ a ‘bitch’ and a ‘streetwalker.’ Sometimes he brandished a riding crop in front of her and once he left condoms on her desk.

“Ms. Walters, then a trading-room secretary at a California brokerage firm, filed a complaint against him alleging sexual harassment.  In a formal hearing, he readily admitted to the whip and the condoms, and to using all of those epithets.  Her case, legal scholars agree, seems a textbook example of illegal harassment as defined by the Supreme Court: a situation in which a ‘reasonable person’ would find the work environment ‘hostile or abusive.’

“So why did Ms. Walters lose?

“Ms. Walters slammed into a little-known, but extraordinarily daunting, roadblock facing many women in the securities industry: Bias complaints, like any other employee dispute, must go through the industry’s mandatory-arbitration system.  That means victims’ complaints can’t be heard in court by judge or jury, no matter how strong their merit.”

Wall Street is the only industry in America that is allowed to run its own private justice system to hear civil rights claims such as sexual harassment and sexual discrimination. It has gotten away with this because those same Big Law firms that control campaign finance laws, recommend new appointees for Federal judges, and have lobbyist teams to make sure Congress keeps mandatory arbitration in place, desperately need those billable hours to Wall Street. But this is nothing more than a protection racket perpetrated by so-called iconic white shoe law firms and a perversion of the Civil Rights Acts of 1964 and 1991. As we wrote last year:

“These legislative acts, passed by both houses of Congress and signed into law by the President of the United States, provide civil rights protections in the workplace including anti-discrimination statutes and court remedies to stamp out sexual predators who use their position of superior rank to sexually harass colleagues.

“The legislation confers on the private litigant the role of private attorney general to pursue not only her own claim but to vindicate the rights of other women to a workplace free of harassment and discrimination. The Equal Employment Opportunity Commission (EEOC), the Federal agency that enforces the civil rights acts, has filed amicus briefs with appellate courts, outlining the importance of the private litigant’s role in functioning as a private attorney general on behalf of society as a whole.

“In a 2003 paper, Stanford Law Professor, Pamela Karlan, explained the critical role that these private attorneys general can perform on behalf of society. Karlan writes: ‘The idea behind the ‘private attorney general’ can be stated relatively simply:  Congress can vindicate important public policy goals by empowering private individuals to bring suit…Virtually all modern civil rights statutes rely heavily on private attorneys general…Congress harnessed private plaintiffs to pursue a broader purpose of obtaining equal treatment for the public at large.’

“Karlan goes on to explain that when the plaintiff is denied her day in court, the important public policy enshrined by the civil rights acts goes unvindicated, and the entire Nation suffers.”

Are there still women like Helen Walters suffering humiliating sexual harassment on Wall Street in order to pay their bills and put a roof over their head? We found a frightening FINRA claim from a woman that was filed in the last two years. The woman claimed: “physical and sexual assault/battery & false imprisonment; sexual harassment; intentional infliction of emotional distress; breach of industry standards of commercial honor and principles of trade pursuant to FINRA Rule 2110.”

Like Walters, the arbitrators dismissed her claims in their entirety. But then they did something else: they assessed her with $7700 in hearing session fees; $1800 for two postponements; and a $2,000 initial claim filing fee.

We’ll be looking into this matter further and we would urge Senator Elizabeth Warren to do the same.

Editor’s Note: The Editor of Wall Street On Parade, Pam Martens, was the lead named plaintiff in a high profile Federal class action lawsuit filed in 1996 which sought to overturn mandatory arbitration on Wall Street for civil rights plaintiffs and shine a bright light in the public courtroom on the egregious sexual harassment and sexual assault experienced by women on Wall Street. Martens walked away from the settlement that was crafted by attorneys for the plaintiffs and the defendants, which enshrined gag orders and left mandatory arbitration in place on Wall Street.

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