Mike Pence Secures the No Law Zone Around Wall Street

By Pam Martens and Russ Martens: October 25, 2017

Wall Street Street SignMillions of Americans have quietly been pondering for months what a President Mike Pence would be like should Donald Trump be impeached or resign. Yesterday they found out and it’s not a pretty picture.

After the U.S. Senate tied 50-50 on a vote yesterday, Vice President Mike Pence cast the deciding vote to keep the nation’s courthouse doors closed to the customers of the Too-Big-to-Fail banks on Wall Street – effectively strengthening the no law zone that already exists for these banks.

The vote came about as a result of the Consumer Financial Protection Bureau (CFPB) issuing its final rule in July which would allow consumers who have been defrauded in financial transactions involving credit cards and bank accounts to have access to file a group action (known legally as a “class action”) using the nation’s courts. The CFPB was created under the Dodd-Frank financial reform legislation of 2010 and Republicans in Congress, particularly Jeb Hensarling, Chair of the House Financial Services Committee, have been trying to gut its power ever since. Hensarling’s last political campaign was heavily financed by the same Wall Street banks who benefit from his efforts to marginalize the CFPB.

Here’s the background:

Wall Street is the only industry in America that contractually bans both its customers and its employees from accessing the nation’s courts as a condition of opening an account or getting a job there. (That’s likely because it’s also the only industry that has the brazenness to let the top lawyers of the largest Wall Street banks meet in secret each year to plan their strategies for keeping their no law zone in force.)

Instead of being able to go to court with a claim of fraud (if you’re a customer), or a claim for labor law violations, like failure to pay overtime or sexual harassment (if you’re an employee), Wall Street makes its customers and employees sign an agreement to take all such claims into an industry-run or privately-run arbitration system.

These private justice systems are not cheaper and fairer as Wall Street’s shills (like the U.S. Chamber of Commerce) insist. Fees can run into tens of thousands of dollars as opposed to a few hundred dollars to file in court; and study after study has found that arbitrators most often rule in favor of the corporate interest over the consumer.

What Wall Street and its army of lawyers like most about these private justice systems is that they are dark. Unlike a public courtroom, the press and the public are not allowed to attend the hearings. There are no publicly available transcripts of the hearings as there would be in court. Arbitrators are instructed that they do not have to follow legal precedent or case law but can rule from their gut; they are not required to write reasoned and detailed decisions so that an appeal of their findings can be made. In fact, it is next to impossible to bring a court appeal of an arbitration ruling because Wall Street’s biggest law firms have spent decades convincing the courts that these decisions must be permanently binding.

Packing the Federal bench with corporate-friendly judges over decades has enshrined this rigged system through multiple appellate court rulings.

Another fatal flaw in these private justice systems is that there is no jury selection from a large public pool of random citizens but rather a repeat-player pool of highly compensated arbitrators.

In September 2007, Public Citizen published a comprehensive 74-page study of mandatory arbitration with a central focus on the National Arbitration Forum. The report is titled “The Arbitration Trap.”  Among its findings related to the National Arbitration Forum, Public Citizen found that in California between January 1, 2003 and March 31, 2007  “…a small cadre of arbitrators handled most of the cases that went to a decision.  In total, 28 arbitrators handled 17,265 cases – accounting for a whopping 89.5 percent of cases in which an arbitrator was appointed – and ruled for the company nearly 95 percent of the time…Topping the list of the busiest arbitrators was Joseph Nardulli, who handled 1,332 arbitrations and ruled for the corporate claimant an overwhelming 97 percent of the time.”

In 2009, Lori Swanson, the Attorney General of Minnesota, charged the National Arbitration Forum with consumer fraud, deceptive trade practices and false advertising.  Swanson’s lawsuit charged that the National Arbitration Forum was financially shackled to debt collection law firms representing major credit card companies. She provided a detailed roadmap of the financial ties.

Less than a week after Swanson introduced her evidence into a court of law, the National Arbitration Forum settled the case by agreeing to stop hearing consumer arbitration cases.

Wall Street’s own industry-run arbitration system also makes good use of the repeat player advantage. On July 20, 2000 the Public Investors Arbitration Bar Association (PIABA) issued a press release accusing the National Association of Securities Dealers (NASD) of rigging its computerized system of selecting arbitrators.  The statement read: “In direct and flagrant violation of federal law, the NASD systematically evaded the Securities and Exchange Commission approved ‘Neutral List Selection System’ arbitration rule requiring arbitrators to be selected on a rotating basis.  Instead, the NASD secretly programmed its computers to select some arbitrators on a seniority basis – just what the rule was designed to prevent.”

PIABA discovered the manipulation when a team of its attorneys demanded a test of the selection system at an NASD/PIABA meeting in Chicago on June 27, 2000.  PIABA predicted that “this rule violation tainted hundreds or even thousands of compulsory securities arbitrations  –  many still ongoing.  In every such instance, the substantive rights of public investors to a neutral panel have been cynically violated.  Many public investors were thus twice cheated: first, by an NASD member firm that fraudulently conned them out of their life’s savings, and second by the NASD Arbitration Department’s rigged panels.”

The NASD-run system is now called the Financial Industry Regulatory Authority or FINRA. For how that’s working out, see Susan Antilla’s “Indicted Lawyers, Peeping Toms Can Wind Up Judges in FINRA Arbitration,” published at TheStreet.com.

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