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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Harlequin001's picture

The system isn't perfect but it's there... if you fancy your chances?

You might get away with it, you never know...

slewie the pi-rat's picture

it's ok to goto traffic court;  especially if you need to appear b/c of bail for accidently plowing into an ATM on the way home from the demolition derby while shitfaced from drinking w/ tyler, who loves to drive backwards, of course...

but even on a minor thing, just go to court during the time allowed before the fuker goes 2warrant on yo funky ass and tell the judge you are thinking of setting it for trial;  tell her the facts as you would whether you were lying or not, ok?  ask her to advise you?  can she help you or not, here?

unless she caves, set it for trial

if the cop shows, waits till she testifies and then just throw yourself, dramatically, on the mercy of the court and make it a real belushi

if you can crack the fuking judge up, it is good b/c the cops will no-show the next time after they realize you can fight back;  finally, you will respect the law but only on sundays, ok?

LetThemEatRand's picture

They only add court costs to the ticket if you lose.

Benjamin Glutton's picture

I went to traffic court in San Diego 25 years ago not to fight a ticket but only to delay payment. Court was no less formal then, but I took a chance by wearing a promo t-shirt that said "I DID IT"(at U-Auto Do It parts store)which made the judge chuckle and say "I take it you are pleading guilty". I told him I simply could not afford the ticket and needed the delay fully expecting to pay the ticket plus court costs.

 

The judge changed my plea to no contest thanking me for brightening his day, withheld adjudication and ordered $60 court costs be paid.

 

A "win" with assessed court costs of $60 while throwing out the $??? ticket. Technically the no contest is a loss but I did beat the ticket and associated fine. He even asked if I could pay the court costs prior to judgement.

Dr. Engali's picture

Maybe they know the damage to their firm is going to be more than the firm can bare if they choose not to knuckle under. Maybe by fighting the corrupt basturds they can expose them for who they are. I for one would rather die fighting than let them strip me of my integrity.

LetThemEatRand's picture

On this one thing we agree.  Egan is taking on the Man.  I suspect it is for their own survival. Go Egan!!

Bolweevil's picture

Egan-Jones
We'll Cut You (TM)

JohnKozac's picture

Maybe it's only a rumor, but the Grapevine says the SEC is willing to settle for all the old issues of Penthouse...and they will drop the case.

disabledvet's picture

"they have rights"? YOU and I have rights...rights mean nothing "to them." They have rights to VIOLATE is more like it. I know one right i'd like to have enforced: the ability to have a personal life. Not that the insanity of "Americanus Publicus" bothers me of course. "It can't ever win." And that suits me just fine.

EverythingEviL's picture

Fuck the SEC, Egan Jones FTW.  I'm sure Obama will find a way to shut them up though...that's his game.  Maybe Breitbart some more people...

Eireann go Brach's picture

I am suing Nancy Pelosi because her parents listed her as human on her birth cert, everyone knows she a fucking space monkey!

Global Hunter's picture

a fucking reptellian space monkey?

Offthebeach's picture

The origional SEC complaint filing, the pages, they were stuck together.

DFCtomm's picture

Rape too. Don't forget that, and student loan forgiveness.

Schmuck Raker's picture

THAT would be a wet dream come true....

OWS rallying in support of Egan-, Jones.

[A smart fan would hit the shit.]

Hulk's picture

EJ should also place a clandestine porn filter in at the SEC. Now THAT would cause them some pain...

veyron's picture

I'm torn as to whether S&P/moody/fitch is more or less unamerican than egan jones

Bolweevil's picture

Is it possible to be more un-American than a French ratings agency?

CreativeDestructor's picture

SEC just needs fresh porn to re-occupy them with something more productive... can anyone thrown them a porno and a spiderman towel please?

Marginal Call's picture

I'm startin' to like this Egan Jones kid.  

HoofHearted's picture

Sean Egan is the man! When RP is in the Oval Office, there will be a spot for Sean Egan.

papaswamp's picture

Time for Project Mayhem...

 

Matt's picture

Wait a second, Zerohedge.com is anti-pornography!? 

That seems pretty funny that people can get addicted to porn in such a way they have to watch more and more  and more until it consumes their life and they forget to eat and starve to death. or something. I'm not so sure that is as credible of a concern as controlled substances.

papaswamp's picture

I think they are anti-watching-porn-while-on-the-taxpayers-dime.

Dr. Engali's picture

Some people just don't get it.

Matt's picture

Did you watch the video? It is universally anti-pornography, and makes some pretty serious claims that basically imply pornography is as addictive as crack cocaine.

I'm sure we can all be in favor of public sector employees not fiddling around while on the taxpayer's dime, whether it be watching pronography, reading zerohedge, or any other thing that is not part of their job. Generally, there should be an expectation that if you are being paid to do a job, you should be doing that job.

tenpanhandle's picture

Comparing Zero Hedge and porn?  I would greatly prefer my  taxes went to proliferating the info and ideas  expoused on ZH as opposed to satisfying the sexual needs of an overpaid underworked uncivil servant via Asian ass porn.

object_orient's picture

The video bothered me too. It's called Fight the New Drug and is pure propaganda. Strange that it only takes the addiction/personal health angle. The victimization of children and women video is probably in the works. Does the US have a pornography czar yet?

Lebensphilosoph's picture

Because all those beautiful young Eastern European girls just loooooove being choked, having their faces ejaculated onto and taking 'double anal' to the point that their insides prolapse from groups of psychopathic perverts, sweaty old men and disease-ridden American gangstas in front of a camera crew for the world to see, for a quick buck, right?

Matt's picture

Your proposed solution to end all injustices everywhere in the world?

Cistercian's picture

The Strict Enablers of Criminality need a serious defeat here.Go Egan Jones!!!!

nmewn's picture

I humbly submit myself as a juror.

hedgeless_horseman's picture

 

 

I, too, would be happy to take time off from my day job as a food service worker responsible for the cream in the SEC cantina's soup.

Arnold Ziffel's picture

SEC has not been in court so long they are probably "Googling" for a map location of the building and driving directions.

FieldingMellish's picture

Noble stand. I have a feeling, however, that EJ will be a martyr for the cause. Good luck.

nmewn's picture

Everyone has a choice in picking which hill they wish to die on. This one looks as good as any.

I wish you good fortune EJ, take a few with you, we'll get the rest ;-)

Dr. Engali's picture

Well spoken nmewn. I hope we all have the courage to do the same.

chunga's picture

We will have no choice. It's going to be us or them.

The bogus ratings on the MBS are a catastprophe. They got this crap rated AAA, then the derivatives kicked into gear.

Well guess what. Right out of the gate and given the very first opportunity to break the law they broke it. The Pooling and Servicing Agreements and the Master Servicer Agreements pursuant to NY Securities Law are operative in regard to REMIC and trump UCC as the banker men would have us believe. It's right here baby.

New York Code - Estates, Powers and Trusts Article 7 § 7-2.4 “Act of trustee in contravention of trust if the trust is expressed in the instrument creating the estate of the trustee, every sale, conveyance or other act of the trustee in contravention of the trust, except as authorized by this article and by any other provision of law, is void”.

If all the Notes and Mortgage conveyences were not delivered to the trust within the closing date (90 days) they are VOID. They are not qualified mortgages. Trying to "backfill" the pools of the trust exposes them to massive negative tax consequences pursuant to IRS 806 A-G.

The Illinois Supreme Court recently made some recommendations regarding these illegal practices used in foreclosures.

The Illinois Bankers’ Association response was rather chilling.

“We are particularly concerned with the implications of the Subcommittee’s recommendations in point 3 requiring that “a copy of each assignment of the mortgage be attached to the foreclosure complaint, and that a copy of the note, as it currently exists, including all endorsements and allonges” also be attached to the complaint. Our concern is further heightened by the statement in footnote 1 of the second proposed version of the “Affidavit of Amounts Due and Owing” that the affidavit “is not intended to relieve the foreclosing party from establishing . . . the party’s right to enforce the instrument of indebtedness if applicable.”

 

 

“Advocates of this result apparently are not concerned with its implications beyond the context of a given lawsuit or class of lawsuits, but the rest of us should be, for obvious reasons. Fannie Mae and Freddie Mac together hold over $5.3 trillion in home mortgages, nearly half the entire residential mortgage market in the United States. Viewed on a prospective basis, Fannie and Freddie presently are issuing more than 95% of all mortgage-backed securities in the country.6 The notion that defaults on these notes cannot effectively be pursued in Illinois courts is untenable. To suggest that tens of thousands of seriously delinquent borrowers should retain their properties in de facto fee simple – which is what would happen, since there would be no other parties to foreclose on these loans (a result that also would encourage many thousands more to strategically default on their loans) – would be to accept a future in which almost no residential mortgages could or would be underwritten in the state of Illinois.”

 

Illinois Bankers Association Re: Discussion Points Submitted for Public Comment and Hearing on April 27, 2012

They created then stole trillions of dollars and skipped out on taxes. Fuck them.

Take all this "moral hazard" shit and stick it right up John Courson's ass.

I love you Egan Jones.

Bolweevil's picture

I don't know WTF you're saying, but I got your back. Egan-Jones Defense Fund!

chunga's picture

What I am saying is this...

If every Jane and Joe Doe had an understanding of how New York Law affects the Securitized New York Common-Law REMIC Trusts in re: Note and Mortgages I think they would stop paying en mass.

All assignments of the Note and conveyances of the Mortgage were required by *law* to take place within 90-days of the start-up date of the Pool.

Subsequent frauds heaped upon that initial one are just further insult.

Alleged lenders know they can never demonstrate a valid enforceable right to foreclose. It cannot ever be "assigned" back in to that 90 day period because it an impossibility.

The lazy susan of fabricated, forged documents, robo-signing, etc. all stem from this fact. There is no allonge, or other inter alia regalia on earth that can travel back in time.

The bogus entities have no standing to foreclose, yet they came and continue to come to the courts with fabricated and forged documents using the courts as their defacto collection agencies.

Many of the MBS Trusts were covered by an insurance policy, commonly referred to as a Derivative or Collateral Contract. Funds collected from the loans allegedly within the MBS, are no longer being paid to the investors, but are an unearned windfall to the servicer.

Likewise, the MBS/Trusts themselves became parties to Derivative Contracts. Most times, the actual Derivative contract is for more, up to ten times (10x), the face value of the MBS. More often than not, multiple insurance policies were taken and traded on the MBS

Tapeworm's picture

why not call attention to this travesty to your supposed representative? I realize that most of the so called tea partiers are now bought, but you can contact them and raise hell, and then get onto local talk radio if you can explain it for popular consumption. E-J will get wiped out with all of the BS that the gombit can throw at them.

 Do your duty to save a sliver of real free market analysis.

chunga's picture

I am in the process of doing that right now.

I am sending an open letter to the presiding justice and am requesting recusal of several Superior Court Justices.

The House and Senate leaders will be copied in and I will set up an online petition.

Hopefully Zero Hedge will have my back and sign the petition which will direct mail all the recipients.

tbd108's picture

Wow! The Little Engine that Could! Or alternately, small company, big balls.

wardawg12's picture

OMFG! Go git'em Sean!

Caviar Emptor's picture

As an attack dog for the cronies, I condemn both Egan-Jones AND the SEC. We're saddled with too much regulation which happened to be asleep at the switch when TSHFT. So let's repeal Dodd-Frank and revoke the charter of the SEC, CFTC and all oversight agencies and then we'll show you some real stock market shock n awe

Matt's picture

You know, I was just thinking we are about 100,000 pages of laws, tax codes and regulations away from creating Utopia.

Elliott Eldrich's picture

Gosh, you mean adding one ten-thousandth of one percent more to the hundreds of trillions of pages of laws, rules and regulations that already exist will be enough to do the job? No problem! We'll achieve that by next week, easy. 

Wow. Utopia. Boy, that's going to be really nice... Or perhaps not...