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tv   Stanford University - Corporate Scandals  CSPAN  February 28, 2019 4:07am-5:13am EST

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i don't know from what direction but it got so viscous and acrid that police officers directing traffic disappeared it was the beginning of having smog related automobile accidents. it was so bad that mothers were dragging their children into department stores and a hysteria built . >> we will go inside a jet propulsion laboratory at caltech responsible for putting rollovers on mars . >> the reason we are here is to do it's never been done before. we are paving the way for human expiration . >> watch the city to of pasadena california this saturday at 7:30 pm eastern on c-span's book tv. sunday 2 pm on american history tv on cspan-3, working with our cable affiliates as we explore the american story.
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>> next, u.s. district court judge from the southern district of new york, takes part in the discussion on corporate scandals and accountability, with wall street journal reporter emily glaser newark hedge fund manager from a kadir. from stanford university in california, this is just over an hour . >> okay, i am a professor of finance and economics and faculty director of the operation society initiative. engaging the gsp community and others on issues that are truly important is a key mission and i want to welcome all of you and thank you for joining us and i would especially like to thank those who flew in to participate. i want to recognize and thank the support of the initiative and those of you being here today.
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we and c-span are videotaping this event, so we hope the conversation will continue. focus on governance as it pertains to corporations. how do we ensure that corporations can be trusted to benefit stakeholders, ultimately, society as a whole, without mistreating, deceiving or harming. how do we ensure that governments write appropriate rules and the corporations comply with those rules and what are the roles of, among others, employees, customers, investors, courts and the media, in shaping corporations, culture and impact on all of us . in october, we hosted the author of bad blood, a book about -- he said one of the grave errors made was to channel
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the fake it till you make it culture that pervades silicon valley. we have many examples of faking it, also known as fraud in corporate america, where they take the form of misleading investors or customers about a product, opening a checking account for customers who didn't ask for them or falsely tweeting that funding has been secured to prioritize your company. if corporations have significant power over customers or employees, they can also harm without breaking the law and if they have political power they may be able to write the law or get away with breaking it. successful business leaders often set lofty goals, but we want them to establish and maintain a culture of honesty and closing when adversity and challenges arise. we also want them to define
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success properly and avoid blind spots. by doing so, they can be better leaders and they will also like the prevent legal trouble, negative publicity, skeptical investors and public anger. >> i think most people in most companies are extremely well- intentioned but there is the capability in any company, particularly in the world that is bottomline driven, to go wrong. some of the subjects of today's conversation provide weekly examples of how things can go wrong, wells fargo releasing a report on reform process, this week was no exception. we are fortunate to have panelist with us today with
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amazingly rich and varied experiences and expertise to provide us with insight. the chief investment officer of a hedge fund based in new york funded in 2017. he was featured on a netflix series as an equity analyst at the hedge fund asset management. more recently, she has taken as short position at tesla, among others. >> emily glaser is a reporter for the wall street journal where she now covers wells fargo and jp morgan chase for new york and los angeles. this has contributed to public and political backlash against banks with median actions and
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executive partners and business practices. the bank is lunch multiple publicity campaigns to regain the public's trust. the honorable judge rycroft has been a federal judge in the u.s. district court for the southern district of new york for more than 22 years. prior to joining the federal bench, this judge was a federal prosecutor in the u.s. attorney's office for the southern district of new york for seven years and then spent 16 years as a white-collar criminal defense lawyer for two large new york firms. he has been unusually outspoken for a judge and when he called a settlement between the sec and bank of america half-baked justice. we will continue to take questions following this from
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the audience . >> now please join me in thinking again and welcoming our distinguished panelists. [ applause ] >> i will start by engaging with the panelists and then we will open it up. hopefully they will be short and to the point. miss kadir, we teacher to students that mannish must focus on managing their companies and also for a public corporation the stock must provide good signals. as a short seller, with executives wanting to show this picture, how does an investor uncover information that a corporation wants to obscure?
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what beyond trading do you do with such information? >> so, the dilemma of the short seller is that the same body of evidence publicly available that management will used to create that narrative is the same information i is a short seller have to use to disprove the fundamentals of the company or show that there is evidence.
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>> to get more into the details i typically avoid earnings reports i like to review the balance sheet because understanding access and liability is what's real about the business and what we can follow the money trail with. we need to be creative about how we use the information and how we extract data and how we access data and what we access, at any point in time we can assume their billion-dollar funds that have access to all the data that they can pay whatever they want to get credit card data and satellite data. what can i do that's different? i can get away from my computer and get out into the world and do real life through other type fieldwork. i can engage and how
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management response to questions and we put them together. when we corak this, what we do with it? we can't just sit on the information because markets, as much as we would like to think are not particularly efficient. sitting on data that is critical to the price discovery is leading to me i have to be creative about disseminating the information.
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we will engage with journalists, activists, short- sellers, and regulators, in order to get the questions out there so investors can see for themselves . >> miss glaser, corporations often punish explicitly or implicitly all those who question their desired narrative they have a key role in exposing gaps between companies cultivated image and reality. how do you know when to ask more questions and how do you get answers and how difficult is it to uncover what's going on for published material? what role does the need for access play? >> a lot was said that i agree with. i always ask follow-up questions. there are no stupid questions, as much as in my head i think they are, it's better to ask them and access depends on the information. let's take wells fargo, similarly public
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information, while very important it's extremely important for me to understand i'm not doing my job if i'm sitting in the office. i'm constantly out meeting people that the company doesn't want me to meet with. i take meetings that are offered to me and after the access part comes in it helps working at the wall street journal because we regularly meet with ceos and executives and i have that attached to my name, however, the real goods, and when i do my job well it's writing about something that no one else knows. scoops are what i live and die by in many ways and that is through current and former employees, shareholders, a whole variety of them, consultants, advisors, regulators, there are so many different types of people that i need to talk to to get a clear picture of what's going on, because a company, especially on the communications team, they are
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trying to paint the most positive picture, rosie narrative, that's a great way to describe it, but if i'm doing my job as a journalist, i need to understand everything that's going on and there's often quite a bit that a company might not want us to know about. the other thing we need to be wary of, especially of wells fargo is when someone reaches out to me as a journalist, it's usually extreme like a bad game of telephone. they either love the company or they hate the company and i need to make sure that i can check that with people i trust. so much of the reporting with wells fargo has been about cultivating sources over time and figuring out who i can check with, who has a more moderate their opinion i hope my sources will say that's not true and it's going too far . it makes me rethink the information i am gathering so we can put it out in a fair objective and accurate way. >> judge rycroft, you have
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prosecuted, defended and judge the individuals and corporations on business and securities and fraud cases, how does the justice system work in corporate context, given the level of control they have and how much intent they can claim in court? >> so, first i want to say it's a pleasure to be here it's hard tearing myself away from the 4 degree above zero weather in new york but here we are. i am sorry to have to say that in my view, the prosecution of corporate crime has significantly deteriorated in
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the united states over the last 20 years. i start with a rather obvious point that inanimate entities like corporations themselves, commit crimes. it individuals within the corporation to make the decisions that lead to criminal conduct. in the period before 2000, the policy at the department of justice was to try to discover exactly who those people were at the highest possible levels of responsibility and i was very time consuming. this required a lot of resources but, frankly it was quite successful. so, you had the successful prosecution of mr. skilling at enron and mr. evers, the ceo of
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worldcom and michael milken in the trump scandal and over 800 people in the savings and loan scandal going all the way up to the top guy, charles keating. in 2000 or so, the justice department's view changed. the nominal reason that they gave for the change, which was to go after companies that was that certain companies had an overly aggressive kind of culture and that if we really wanted to deter widespread white-collar corporate crime in the long run, we needed to change the culture of these companies through compliance measures and the like.
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. even on its face, i think that was misguided and the professor brandon garrett who did a definitive study of all the corporate prosecutions between 1996 and 2014, has concluded that there is a high rate of recidivism and much less changing corporate culture on a part of those corporations most needing change then it was hypothesized would occur. but, i think that really the reason the department of justice changed its policy was political and resource management. when you bring a case against the company under federal law you can invoke what's called the doctrine of superior which means that the crime of even the lowest level individual,
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done on the half of the corporation can be imputed to the corporation. so, corporations in the typical case are dead in the water to begin with and have to come to a settlement and pay big fines and that's politically attractive and i don't have to spend much of resources that all to realize the result. in theory, you could both go after the corporation and in practice that doesn't happen because it would be a much more arduous, lengthy process to go after the individual, so achieving off and politically they might say
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in terms of deterrence from going after the companies. . this is a seriously misguided policy . >> famously using profanity when challenged by a short seller even brother ceose claimed short-sellers for his bank's failure and critic cars analysts with bonehead questions. -- deal with hostility from this company and the cheerleaders . >> first and foremost when i see company management going after journalists are short- sellers or anyone asking a difficult question it's a red flag and i will do again so don't do it. but, i think what is most alarming over the past
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several years and has become progressively more obvious is that the investment community and those that are going long stock are increasingly prone to the applying company management and can do no wrong. so if you ask the ceo, have you committed fraud and they tell you know i have not, you believe him and you don't ask further questions, you don't even consider the evidence put in front of you because our decision-making has become subject dated by the stock market and what prices are doing and we've been 10 years in the market and the prices have just been going up so we feel that the thesis is validated by the price action and typically, when you make money you can say you are right but in this case, the real asset value is not really reflect the in the price movement. so we can consider this to be validation. may have short-sellers or skip tics coming forward to ask questions, we should listen
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because at some point if you are a true fiduciary and want to act responsibly and you want to consider when is a judicious time to sell and when someone asked the tough westerns you need to think to yourself is it time to sell. so, to just put this into context evyn and dell, i am a short-term health insurer and i made about 50% on the position already this year and at the end of the last year, i assessed whether it was time for me to cover my position with significant process and it seemed almost cheap on an earnings basis, so maybe it was time to walk away. so i was the only short seller that was apparently there, it was difficult to find out the location of this investor because it wasn't disc closed to anyone asking questions.
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when i was there, i asked if the event was being webcast for the purpose of full disclosure and they said no so i took out my phone and i recorded the events to have a record and took them out to investors, and i was warned several times that i was not allowed to record and that phone was taken away from me then, periodically even though i was sitting widely in the back of the room and not asking questions, the ceo of the company repeatedly came back to me to taught me. an investor on the board was passing notes to the ceo, giving him things to say to me, including an invitation to come to the stage in order to engage in some sort of rat battle? i'm not sure. but throughout the course of
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this i didn't realize it was this bad so maybe it's not time to cover it's time to double down. so really, you have to think to yourself, if you're invested in the company and the executive team decides the best course of action is to humiliate and attack those asking questions, then the skeptic is incorrect in their assertion, is it really a good time? is a good character to be engaging in those types of attack? is that the kind of person you want running your business and being the safeguard of your capital? i think investors have an obligation to engage with skeptics and put pressure on management, they have voting rights as a short seller i don't have voting rights but shareholders do. i think investors need to be much more cognizant of the
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questions being asked and put more? on management . >> we take this issue very seriously and it's almost become clichi, to respond to reports about scandals, yet often the change little we heard from the judge, without pressure from the outside. now moving to a second crisis rebranding, instead of reestablish we now have wells fargo. how serious is the issue of executives and boards misdiagnosing problems inking of them as public relations problems. , that's what it's all about and then how do you as an investor know whether they are just making cosmetic changes or really changing? >> i want to address some ing
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that judge break off mentioned in terms of sometimes the settlements and how things shake out and what happened, it reminded me of covering big banks during for a large settlement in 2015 when they finally pleaded guilty and the stock prices went up. i just wanted to mention that. so, culture, it's a very amorphous topic and when a company says were changing our culture and we have new ad campaigns, it's hard for journalists and difficult to write about culture that doesn't have metrics attached to it. so, what i try to look for ours civics that are actually showing change. one of the things i noticed with wells fargo is right from this chart and for several months after the topic said we do not have a culture problem, everything is great, the certain part of the bank is
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different, they never touch retail bank, it was a new person they brought in and from there we saw problem after problem after problem. i thought my job would calm down after a little while and in fact when i started covering big banks, i was told to focus 70% on jpmorgan and 30% on wells fargo but that obviously change dramatically. i thought things would calm down , the 2016 scandal, nonstop and then i thought you were coming out of the wood but then more happened and that leads you to question what is going on with the culture. what i can say is right now i do listen to what the executives say and a big comment coming from the ceo, timothy sloan, of wells fargo and chief financial officer is that these are legacy problems. when the federal reserve slapped wells fargo within unprecedented action in them, i
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year ago, the bank made it very clear that these are old issues and nothing is new, the same happened when the occ controlled the currency and the consumer financial protection bureau had a settlement with the bank for $1 billion. nothing is new, these are old legacy problems. i did make a new cheat sheet of problems in 2017 and 18 and i'm constantly wondering, are these old problems, employees added social security numbers and other financial information when they were doing anti-money laundering controls and checks, we heard about a regulatory warning to the bank about technology oversight for more than two dozen open regulatory warnings in 2018. they are
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management problems that we wrote about in the investigation is adding the aml issues and foreign-exchange problems through 2017. so, i could keep going but that leads me to think how much is the culture changing? what is new and what is old and wire the scripted responses the same and as a journalist it makes me want to keep probing and asking questions. when they say they are taking the issue seriously, i just look at the facts . >> great. judge wyckoff, lawyers and consultants now take responsibility to investigate, diagnose problems and propose remedies in the private sector. you describe the ecosystem as a chance to rehabilitate the company's culture. the investigations and reports by wells fargo bank are one example. overseeing settlement are also
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a source for lawyers and consultants, what is your view of how well this system of an corporations rear to live in themselves work. does this process serve the interests of shareholders and the broader goal of justice in the context? >> so, i first want to say that i do not want to comment about wells fargo and nothing i say should be taken as reflective of that under federal law and precluded from commenting on any matter in any respect that is ongoing. in any event, with emily here i don't need to comment. [ laughter ] >> the corporate prosecution approach that i described before has proven very lucrative to
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certain institutions or organizations. all at the expense of shareholders virtually have nothing to do with the underlying misconduct. so, so whereas in the old days, prosecutors and people at the sec and so forth would undertake arduous lengthy, difficult, investigations of alleged corporate malfeasance, now what happens is that the prosecutor will allay a subpoena on the company having heard about some problem and the company will have an outside counsel almost a former prosecutor always from the same office, who comes and visits and say that we are prepared to
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investigate this and we want to do the right thing and we want to cooperate. don't feel you need to spend any time or money on this, we will get you the answers with a thorough investigation and report back to you in six or nine months. it's very hard for the prosecutor to say no to that offer. these are very lucrative assignments. i'm told that in the siemens case, the netted cheese to $3 billion if you want to know why they hired mary jo white, now you know. but, that is just the start.
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because, after counsel comes back and says that we have cleaned up our act, counsel will almost always propose a new compliance measure to create a better culture to make sure this never happens again and, the government will may be up the ante and say no that's not enough, we need further compliance measures. and that's a very expensive proposition that typically exists over several years and involves people both hired by the company and from outside the company has to pay for in all of this again comes out of the pockets of the innocent shareholders. so, there is a strong economic motive pushing this kind of approach and yet to repeat what
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i mentioned earlier, all the most careful studies suggest that it does not accomplish that much there are cases, pfizer went through four different deferred prosecution agreements and broke each one of them each time announcing that today we put in place compliance measures that prevent us from ever doing anything wrong again. when, finally, the government had no choice but to bring a full-fledged prosecution, they were rightly concerned about the fact that they don't want to put pfizer out of business, which would've been very unfair to the shareholders and many employees and had nothing to do with the misconduct, so, the actual guilty plea was entered by a shell subsidiary of pfizer
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so that only the shell was put out of business and not the company as a whole. these are the kinds of dilemmas you face when you go down this road, as opposed to if you were going after a high-level executive, no company is going to fold because a high level executive was prosecuted and went to jail. >> we have a couple more questions for the whole panel anyone who wants to respond, describe the blessed nature and optimistic executive. what's
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the difference in optimism and willful blindness did not hear or see about problems just conveying an implicit message that can cover up problems and not bring them up. some of this was covered by a previous answer, how did they's like the right balance between skepticism and optimism? >> i don't think skepticism and optimism are on two different sides of the coin they are the exact same thing. in order to believe in the long- term prospect of the company you need to be skeptical about what management is doing. at this point in history, you face a problem where investors need to equate the success of a business to the success of the executive. we are too dependent on the ceo founders, due to the rise in technology companies, where we expect that the ceo founders that have all the power within the company as far
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as making decisions, there are no checks and balances. we applaud the executives when they surround themselves with employees that are yes-men and nobody wants to take accountability anymore. it's really down to whatever the executive wants because he or she is a genius that they are best suited to make decisions and i think this is terribly unwise but we need to return to a time where all of the individuals the auditors and members of the board, the investors, they all need to realize what other separate duties in this financial system ? they need to not act as pawns of executive management but act independently and take accountability for these things because ultimately if the executive makes fraudulent decisions everyone is going down . >> i would just add that experience is necessary, but when you surround yourselves with the same people year in
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and year out, whether management or the board, you are not getting fresh perspective. i will bring it back to wells fargo. i did a little math on the trade right over here and look at some numbers on the proxy and the 2016 proxy which covered the 2015 year, there were nine directors on the board that served between five and 15 years. that's a long tenure. you need to have a lot of fresh blood on the board and the bank has since added six new directors since the scandal became public. they also counted, and a lot of companies do this, procter & gamble when an activist investor came in and other companies. this culture of management that served 20+ years together and grown up together, if you are bringing in outsiders who are really questioning this that is quell and have what turns into
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yes-men without realizing it, that is when the problems can continue growing, even without people noticing it. >> so, i'm not sure it's a question of optimism or pessimism, as an american i am of course a for an optimist but , the legal doctrine of conscious disregard, requires that you intentionally close rise to what is there to be seen , it's not just that you are often a cloud and should be more down to earth. it requires that you purposely say i don't want to hear that were, joe, you take care of
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that, don't tell me about it. my experience, as a prosecutor is that this is extremely common at high levels in certain areas, a lot of accounting fraud. fits that situation. this is a civil disregard or conscious disregard theory showing you purposely turn yourself away from what was there, clearly to be seen peer >> a question for the whole panel. it was the la times and not any regulator, the federal reserve took almost 17 months after the scope of the scandal became public to take action and that's a key regulator for
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tesla. elon musk has repeatedly insulted the sec both before and after selling securities. there are media reports about working conditions in tesla and recently resulted in six citations for a fine of $30,000. are regulators doing their job? what messages are these agencies sending to the market with this lack of action. investors are standing by and allowing this to occur and regulators are all rolling over and are under resourced and there is so much fraud in the market, how do you even have the time to send to prosecutors
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and you have enough evidence for criminal corporate behavior. it's an increasingly difficult job. nothing is more effective it will take years to initiate investigations often and they will collect thousands of pages. they can't do anything, i'm not sure if it's because they simply can't where there are some elements of regulatory capture. . the average person is then better aware. we are short a
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company and they financial time is come out indicating fraud and criminal money-laundering at a german bank wire card. within minutes of the publication coming out, the company itself comes out saying the reports are defamatory, denying all claims and within less than a day of those reports coming out, the german public prosecutor comes out and says they don't believe there to be any wrongdoing occurring at this company wire card and then shortly after that the german security regulator says they are launching a market manipulation probe into the trading around this. so in the u.s., i think we haven't reached that point of regulatory capture but there needs to be safer stores in the
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corporation and corporate system because you simply aren't seeing corporate prosecutions anymore. there's no moment of comeuppance where these executives are engaged in such high levels of crime. the justice system isn't holding them in a counselor who is? i would add a couple points. they put this number that i said it with wells fargo and they paid about $4 billion in collectively since 2016, other problems, better or worse than bank of america and the mortgage crisis, you can
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decide, my job is presenting the information in doing it in a fair and accurate way but what i will say is there are a lot of outstanding issues and i think you mentioned before how long some of these investigations take tesla is still under a criminal investigation is a while there's a $30,000 settlement pennies to these companies, i'm curious what will happen with this criminal investigation. with wells fargo there is a open-end will take faceted department of justice and scc separate investigations going on so we have to wonder what will happen there. i think, sometimes regulators try to self-correct a little bit and when you mention the pfizer example it reminded me of wells fargo that had an ongoing dialogue with the fed and the occ about asking risk management systems which is how it will find and prevent problems they kept going back and forth again and again, submit, extend a deadline, we
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will give you language that will make you realize you need to resubmit the risk framework. this has gone on and on the risk framework was still not approved many years later so it's not the same but how much give-and-take is there, they finally had an unprecedented enforcement action and showed its strength on janet yellen's last day. had to give regulators credit, it's how long it takes, what happens in the amount of the fine that helps us understand the context around it. >> so, i had a conversation about a week ago with the u.s. attorney for the southern district of new york, he probably thought this was a private conversation, but in the confidence of the c-span broadcast, i will relay it. , he was complaining that he
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was receiving fewer criminal referrals from the sec he than in prior years and by the way, both he and i have a great respect for the sec and there are 100 different reasons this might have occurred so, i don't want to make too much out of it but i said to him, well, what are you gonna do about it and i said i've already taken this that. i have arranged for each member of the fraud unit the one that prosecutes these matters, to receive each morning, a copy of the wall street journal . >> i did not give judge break off any financial anything that was exchanged in this panel . >> okay. were running out of time, 15 minutes or little more than that for audience questions. just raise your hand and go ahead and speak . >> i wanted to ask a question,
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is the possibility -- without admitting or denying guilt incentivize -- the cost of doing business? >> so, this policy goes back to the 1970s i think it's a misguided policy but, let me tell you what the rationale is. it arose in the context of the fine core access act most american companies were paying bribes and the sec's dead, we think that was a violation of security laws because you didn't disclose it so there was a failure to disclose. but, we understand that
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congress had not yet act it at the time you did this so we will allow you to settle and the reason that was important to the company and the reason it still important is class- action. they do not want to be in the position of having admitted something that will then lead to their being as we say in the law, collaterally estopped from denying it in the corresponding class-action. it's all about class actions and the large exposure they typically find in a class- action. the sec goes along with it because it makes settlement so much easier. so, it's just a resource saving mechanism for them. the problem i have with it is that no one knows the truth. so, here you have the sec and te
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complaints saying they did all sorts of bad things. here you have a company not admitting or denying call and in the old days, the next day, they would issue a press release saying we deny, but we settled because it was the cost of doing business. the sec put in a gag rule which i have also criticized as perhaps a violation of the first amendment where you can no longer if you are the company, you don't have to admit anything, but, so i am told, and i don't know it is true, but what companies now do is that they leak the denial to the wall street journal. the public, in the truly important
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cases, has an interest in knowing what the truth this park the effects of these settlements is you don't know what the truth is. summer months are a good thing as a general matter, but there are cases and cases, and when an important claim is made by a government agency that you committed massive fraud that has cost investors and the public generally millions and even billions of dollars, and the public never knows whether that was or what type the accusation was, that is not a good way to receive it. >> part of the thing that occurs to me a great deal, is
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the extent to how much they would like executive compensation and whether executive compensation and the nature of it, the size of it, and the methodology of it, it is a huge warning signal and the source of fraud and misrepresentation and destruction of value that you talk about. >> i think that is a great question. what we have seen and this really goes back to corporate governance and the role of the board in many cases because they are dictating how top management are paid and at large companies in the millions if not tens of millions of dollars. what we have seen especially in the banking injury -- industry is that there is more ceos are executives that are paid in performance shares that invest over time, usually a couple of years at least. what i have seen with wells fargo and i want to give them
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credit where credit is due, and he came up in these reports with more than 100 pages that was released this week, is that they have significantly changed how they compensate executives. sometimes clawbacks are public and sometimes are private, and i like to write about them and they are private because i think it is or is doing -- interesting to see how much money came back. at wells fargo, and i want to get this number right, they have tens of millions of dollars and i will be on the safe side, but i know there are more private ones, and i am still trying to figure out. another way that compensation has changed goes back to companies adding a risk management component in performance evaluation. i think this is key because a lot of times, the scandals as the media likes to call them, but very serious issues and sometimes fraudulent will come
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up and the executive authority -- has already been paid and retired. we notified wells fargo and in part because the office of the comptroller of currency, there has been a limitation on golden parachutes. if you just retire and breed and have not been fired, you cannot vet millions of dollars anymore. soon i will -- >> i will only add one thing and that while you are right the compensation is a major component of this mix, other changes can often be equally or of greater significance. for example, when i was a kid, bankers, they was the sleepy eyed people of the world, very conservative, and then glass fiddle was repealed and the bankers became as a class a
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much more aggressive because they was reeling in a different kind of business. that can also be important. >> following up on the last question, there was a case when michael eisner fired a man for very poor performance over the course of the year and he walked away with 130 me dollars in severance which 20 years ago was actually big money. this led to a suit in the district court, and i asked you about the role of the judge in this litigation because the judge their road an opinion that said eyster has come forward and said there is no basis for denying him the compensation because they cannot find justifiable cause even though there was spectacular evidence in the trial that he had repeatedly lied.
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he was a 25% shareholder at the time, and the first of many of these, and the judge said he has come forward and said there is no basis for discrimination, and that is how the case ended. a different judge i think would have at least highlighted all of the evidence and dishonesty, and i think sending a message to the corporate world that dishonesty will be disregarded as a corporate message. >> i certainly don't want to comment on whether or not the judge got it wrong or not in that case. the court of chancery is a very important court and unusual in the anglo-american set up because it is not a jury situation. it is a judge making most of the factual determinations were
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and in most cases, in most courts of the united states, it is the jury that makes the final determinations. also something that is somewhat unique to the anglo-american system, which is that the factual findings are subject to very limited review on appeal. they can only be reversed for clear era where as in most european systems, a higher court can say we have looked at the record, and we just don't agree. week come out on the facts differently than the lower court. i think it is built into our system perhaps too much difference for the district court and lower courts with the
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big exception being my decision. but i think there is a little bit of an institutional problem, but i cannot comment on the specific case. >> it strikes me there may be 100 different ways that the courts are skewed in favor of a large corporation, and you start with arbitration, and it cost $20 to search for a case and get a document. what can actually be done in the southern district of new york today, right now, to start to reverse that trend? is there anything or any pilot project, and i look and i don't see a lot going on, and we all kind of know the situation that we are in, and is there just a lack of willpower or what is going on there? >> i think you are raising more than one question there.
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if the assertion is that the courts are biased in favor of companies, i actually don't think that is true. but if what you are talking about is access to the courts, that is a huge problem. but is much more of a problem for everyday folks have an everyday legal problems. the problem here is that the legal profession which we call it a profession but it is actually economically a cartel, they have priced their self out of the price range that most americans can afford. the statistics are really quite shocking. in family court and housing court, which are the two courts that everyday americans most get involved in sooner or later, over two thirds of the
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individuals are not represented by lawyers at all. they make enough so that they can appoint a lawyer, but don't make enough they can actually afford a lawyer. they loose cases in those two courts and a 500% greater rate than those who are represented by lawyers. i think there are two solutions for certain, online, legal service is definitely something that can improve the situation. i would like to see, what are the equivalent in the medical area of those practitioners. legal technicians who would not require three years of law school and i don't think you
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need three years of law school anyway. but would have a certain amount of training and a certain apprenticeship, and then to do basic skills like go into family court and housing court and represent them. that is a different plight from what you are talking about, but i think it is maybe one of the single greatest legal problems in the united states. >> one last question. >> i am a first-year mba student and coming into this as working for a bunch of large financial companies, my question is some of the stories that we probably don't hear about are those situations where these type of scandals, and we hear that some of them are actually handled well. i am wondering if from your perspective if you have any examples of where executives are approaching these and what you think are responsible actions in the face of very difficult decisions.
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are those stories happy are those that don't come up so we don't get to see it. >> there have been a number of different problems that have come up in different ways, and i think in the two years and four months since the sales practice problems have occurred, they have changed the way they acknowledge problems and come forth with what they are or are not doing and engaged and trying to be more transparent. i think you can see company evolve over time, especially when they are in the hot seat. i have to keep thinking about companies that have done. i will come back to you on that and i don't know if any one of you can weigh in. >> i want to say a more general thing, and i think it is beyond question that american business people as a whole are far more honest than integrate many countries of the world. i just had a case that settled a
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few months ago, and this was a class action based on what had occurred in brazil. the corruption there is epidemic lodges throughout the company itself, but other companies that are suppliers, the government of brazil, and the whole thing was totally corrupt from top to bottom. you don't see that in the united states, thank god. we have lots of problems, and we have been discussing, but i don't want to neglect to put this in a broader perspective that american business people as a whole think have much to be proud of. >> i think a lot of that has to do with corporate transparency in the united states. i think the reporting climate in the u.s. is much more stringent, at least at the
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public level. but there have been movements to question whether not many quarterly reporting. i think we need to ask the companies they are investing in for more information and when questions arise, they do exist, and not all companies that commit fraud are doing so intentionally. sometimes you are between a rock and a hard place and your fundamentals are deteriorating and in a typical business cycle. you will bring in outsiders to investigate the company and you will make that report public to your investors, then they can assess whether or not the problems are resolved. it comes down to transparency in the united states, which is much greater than the rest of the world. >> i want to thank you all for being here and thanks to the panel.[ applause ]>> thank you. >> i want to mention one thing and our next event will be
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february 28, and we will have the cofounder of blackrock, and the effect on the governors conference. >> here is what we are covering on thursday. the house will gavel in and 9:00 p.m. eastern to debate and vote on a gun background check bill. c-span 2 is live with the senate and the debate on the nomination of andrew wheeler to head the environmental protection agency. on c-span 3, the political activist conference has senators that are speaking like mike lee. a judiciary committee on the national emergency act of 1976,
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which gives the president authority to declare a national emergency. >> this weekend, book television will be live from the annual festival of books in tucson. it will start saturday at noon eastern feast -- featuring republican strategist rick wilson featuring his book everything that trump touches dice. then american prism, our reporters undercover journey into the world of punishment. and, the true story of the worst see disaster. then professor and author greg grandin, the end of myth, from the frontier to the border wall in the mind of america. on sunday, our life coverage continues with journalist dave collins and his book parkland,
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birth of a movement. in our newsweek national political correspondent with her book golden handcuffs, the secret history of trumps win. then a girls guide to missiles, growing up in the american secret desert. watch our live coverage of the 11th annual tucson festival of books this weekend on the tv on c-span 2. >> a look at the potential trade agreement between the u.s., mexico and canada, and white house officials and officials from mexico and canada and they spoke about the past four to getting the deal ratified. also steve case will be talked about the lessons he learned over the course of his career. this was from the national governors winter meeting this past weekend and watched it. >> gmo

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