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David Takes On The Porn-Addicted Goliath: Egan-Jones Countersues The SEC

Tyler Durden's picture





 

A month and a half after the SEC took a much-deserved break from watching taxpayer-funded pornography, and stumbled on the scene with its latest pathetic attempt to scapegoat someone, anyone, for its years of gross incompetence, corruption, and inability to prosecute any of the true perpetrators for an event that wiped out tens of trillions in US wealth, by suing Egan-Jones for "improperly" filing their NRSRO application in what was a glaring attempt to shut them up, the only rating agency with any credibility has done what nobody else in the history of modern crony capitalist-cum-socialist America has dared to do: fight back. We have only three words for Sean Egan:  For. The. Win.

From the just filed lawsuit (District of Columbia, 12-cv-00920)

As reported widely, the damage recently done by the large issuer-paid firms, which have a virtual monopoly on the ratings industry, is almost incalculable. Congress has found that the large issuer-paid firms were instrumental in creating inflated and erroneous AAA ratings, for billions in profits to those firms, which fueled the ABS and collateralized debt obligation (“CDO”) market; which, when the market collapsed in 2008, it led to an estimated trillion dollars in losses and the largest financial crises since the Great Depression. The vast majority of the 2004-2007 ABS and CDO debt rated AAA by the large issuer-paid firms is now graded as junk.

As the Congressional Findings published in the Dodd-Frank Act make clear:

In the recent financial crisis, the ratings on structured financial products have proven to be inaccurate. This inaccuracy contributed significantly to the management of risks by financial institutions and investors, which in turn adversely impacted the health of the economy in the United States  and around the world. Such inaccuracy necessitates increased accountability on the part of credit ratings agencies.

As this Complaint makes unmistakably plain, a credit ratings agency (“CRA”) that the SEC chose to hold “accountable” since 2008 is Egan-Jones -- the one small independent ratings firm that actually warned the capital markets of dangerously over-rated ABS and CDO debt and has long been a valuable independent bellwether of true credit quality. The Administrative Proceeding is the latest in a series of SEC actions which are designed to diminish and marginalize Egan-Jones while supporting and maintaining the status quo of an issuer-paid ratings agency monopoly in direct, indeed, striking contravention of specific Congressional direction in both the Reform Act and the Dodd-Frank Act. While the SEC targets Egan-Jones for alleged infractions which have not affected a single rating or investor, the SEC has not suggested that it will ever take any real, proportional action against the large issuer-paid firms for issuing profitable inflated ABS and CDO ratings which brought about America’s economic crises.

...

Evidence of the SEC’s bias against Egan-Jones and towards the large issuer paid firms, includes, among other matters detailed in this Complaint, the SEC’s decision to ignore the important division between its regulatory inspection and examination functions on the one hand, and non-public investigative and enforcement functions on the other, by designating members of the Office of Compliance, Inspections and Examinations (“OCIE”) as officers of the SEC’s Division of Enforcement (“Enforcement”) while the OICE staff still were performing actively OCIE regulatory and examination functions.

Egan-Jones and Mr. Egan therefore seek declaratory and injunctive relief to remove the Administrative Proceeding to this federal court. Such removal is necessary to prevent the violation of Egan-Jones’ Due Process, Equal Protection and First Amendment rights. This Enforcement Action, if allowed to proceed in an administrative forum, would deprive both Egan-Jones and Mr. Egan of their right to a jury trial and other critical procedural safeguards available in our judicial system, including, but not limited to, the ability to mount defenses and obtain evidence in support thereof relating to the unfair and disparate treatment of Egan-Jones by the SEC, with no rational basis, and evidence relating to the motive for the SEC to do so; the SEC’s improper motive in bringing this action including the denial or marginalization of Egan-Jones’ content and voice in the marketplace; and the maintenance and continuation of the status quo conflicted issuer-paid ratings model in contravention of Congressional direction. For the reasons set forth in this Complaint, Egan-Jones and Mr. Egan come before this Court and respectfully ask for declaratory and expedited judicial relief in the form of removal of the Enforcement Action to this Federal Court.

* * *

If we could only interject our fondest wish: make this a fight to the death.

 

Full filing:

 

And our personal message to the SEC:

 

 


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Thu, 06/07/2012 - 00:38 | Link to Comment Tapeworm
Tapeworm's picture

If we could only interject our fondest wish: make this a fight to the death.

Death will come quickly because they will be bled to death by goomint fecks on the hunt for a good job from the fraudsters.

 It is up to all of us to raise hell with the maggots that are going after Egan-Jones.

Fax your congressthing with your protest on the treatment of the only independent ratings agency. Don't let the gombit wipe them out through one sided litigation. Use your hatred of the system in a constructive way to support independent analysis.

Thu, 06/07/2012 - 00:44 | Link to Comment jcmjr
jcmjr's picture

Facist fucking SEC and their "administrative proceedings."

Thu, 06/07/2012 - 00:47 | Link to Comment iamme
iamme's picture

For great justice.

 

Thu, 06/07/2012 - 01:13 | Link to Comment anonnn
anonnn's picture

 omit

 

Thu, 06/07/2012 - 01:16 | Link to Comment AGuy
AGuy's picture

Unfortunately, this is a fight Egan Jones can not possibly win. Much like asking the Mafia or a crime organization to return stolen merchandise. Its just not going to happen, and if you make a stink about it, perhaps if your lucky just a few broken ribs, else its swim with the fishes.

Lets face the facts, The Federal gov't has morphed into the world's largest crime organization, bent on depriving honest workers from fair play and justice. No matter how well an argument Egan makes and proves its case, it will lose. Its very likely Egan Jones will face punitive damages as the Federal Mafia makes an example of them.

 

 

Thu, 06/07/2012 - 01:35 | Link to Comment Bolweevil
Bolweevil's picture

No reason to not bloody some noses on your way out though, eh? Just because you "can't win" doesn't mean you shouldn't play. Cue Buster Douglas.

Thu, 06/07/2012 - 02:00 | Link to Comment Lux Fiat
Lux Fiat's picture

If you think that you've already lost the fight before it starts, then you have handed victory to your opponents...without a fight.  Somewhere in the deep dark past on ZH, someone made mention of "learned helplessness".  To many people have let themselves fall into that trap. 

From Wikipedia:  "Learned helplessness is a technical term that refers to the condition of a human or animal that has learned to behave helplessly, failing to respond even though there are opportunities for it help to itself by avoiding unpleasant circumstances or by gaining positive rewards. Learned helplessness theory is the view that clinical depression and related mental illnesses may result from a perceived absence of control over the outcome of a situation."

Thu, 06/07/2012 - 04:09 | Link to Comment Seorse Gorog fr...
Seorse Gorog from that Quantum Entanglement Fund. alright_.-'s picture

That is one shit video.

Thu, 06/07/2012 - 05:49 | Link to Comment fiddy pence haf...
fiddy pence haff pound's picture

this is historically-significant corruption.

historically, the rich and powerful have abused their position,

and enslaved the populace. If this were the Middle Ages,

this could be solved by going to war and stealing from another

country.

Now with "peace" & "democracy", that is not an option for countries

that aren't the US.

The only option is internal revolution, of some sort. Either you set

up a parallel government, ignoring the oligarchs, or.....

I say look at Basil II and how he controlled the rich, and made

Byzantium powerful and fair for the 99%. But, no country now 

has that kind of politician, except Iceland.

Thu, 06/07/2012 - 06:42 | Link to Comment pcrs
pcrs's picture

Fighting the government in the courts of the government. No chance, it's suicide.

Thu, 06/07/2012 - 08:03 | Link to Comment Let The Wurlitz...
Let The Wurlitzer Play's picture

Live free or die.

 

Thu, 06/07/2012 - 08:34 | Link to Comment Miss Expectations
Miss Expectations's picture

Since the SEC will whip out anything they can in going after Egan-Jones, is there a way to see if any of the serial SEC porn addicted employees names is on any of reams of paperwork launched against Egan-Jones?

Thu, 06/07/2012 - 08:43 | Link to Comment GMadScientist
GMadScientist's picture

This could turn out to be the most interesting discovery phase in decades.

Thu, 06/07/2012 - 09:48 | Link to Comment shovelhead
shovelhead's picture

Good for Egan Jones shining a light on these cockroaches.

The pay for ratings agencies and the SEC aided and abetted the biggest swindle of all time.

Time for some jumpsuit fashion upgrades.

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