For those who last year watched the 11-hour televised Senate hearings of Goldman Sachs, many will remember an exchange between Sen. Carl Levin (D-Mich.), chair of the Senate’s Permanent Subcommittee on Investigations (PSI), and Goldman Sachs CFO David Viniar. Grilled by Levin concerning internal documents that showed the investment banker knew its activities were fraudulent, Viniar responded that it was unfortunate that the emails existed.
Gary Brown is a shareholder with the law firm Baker, Donelson, Bearman, Caldwell & Berkowitz, and among his practice areas are securities offerings and related compliance issues and corporate investigations.
Brown, 55, was hired by the PSI last year as that body investigated the root cause and who might be liable for the financial system collapse. He spent months concentrating on the activities of Goldman Sachs, playing an important role in the 650-page report on the Wall Street nosedive.
However, it was not Brown’s first time in Washington to investigate a scandal. In 2002, he served on the team that investigated the Enron case.
In 2006, he testified before the PSI on offshore and other tax devices used to circumvent U.S. securities laws, advised on the Sarbanes-Oxley Act and provided testimony before the PSI on U.S. investment banks’ activities and how they assisted Enron in doctoring its financials.
Those experiences left him in ill humor during the Goldman Sachs hearings.
“We investigated six groups with oversight responsibility of Enron,” Brown remembered. “Four of those got additional regulations. The two that didn’t were investment bankers and credit rating agencies. And those two groups are the ones primarily responsible for the recent financial collapse.
“I said then that we need to hold these characters accountable. We did not; and we still have not.”
He recalled, with obvious bitterness, work he did on a legislative package that proposed amending the Dodd-Frank Wall Street Reform and Consumer Protection Act, which President Obama signed into law last year. The legislation would have overturned the Supreme Court ruling that removed liability from investment bankers and others for the financial collapse.
The amendment package got nowhere.
When asked if these experiences jaded his perception of the financial industry and the federal government, Brown said, “As far as the financial industry goes, I’ve learned you better turn over some rocks before you trust anybody. The government — it’s broken. Congress is broken. That’s not news; everybody knows it.”
While disappointed that no one was held accountable for the Wall Street bust, Brown said he is proud of the work of he and his colleagues did during the most recent PSI investigation. He acknowledged that some might view the report as partisan. But he maintained that he witnessed no partisanship during any of his PSI investigative work.
In fact, Brown becomes somewhat indignant concerning criticism of the PSI. Formed in 1952, the body has played a pivotal role in history, involved in everything from Joseph McCarthy hearings in U.S. communist activities to labor racketeering.
“PSI is a terrific investigative body with a rich heritage, and Chairman Levin and Ranking Member Tom Coburn (R-Okla.) and the other members showed what we can accomplish when everyone works together,” Brown told the Vanderbilt Lawyer magazine. (Brown is a Vanderbilt alumnus, and currently teaches at his alma mater.)
He also pointed out that he worked for a Republican-controlled Congress during the Enron hearings and Democrats during the recent financial collapse investigation. Brown said he found no difference in the two investigations.
Brown has gained some personal satisfaction from his D.C. investigative work. Due to his work on Enron, Brown was forced to divest his stock portfolio to avoid any conflict of interest. Thus, he managed to avoid the heavy losses when the market went south.
He also scored some points for Southerners. Based in Nashville, Tenn., Brown ran into the same “hick lawyer” bias many Mississippi attorneys report.
During his investigation of Goldman Sachs, Brown discovered a clear securities law violation. He reported it to his peers, and was promptly dismissed. Little did he know that the Securities and Exchange Commission was looking into the same transaction, which they dubbed “Abacus.” The day after announcing his finding of fraud, the SEC announced it was charging Goldman Sachs with fraud for Abacus.
With no one held liable for the recent financial collapse, Brown wonders when he might be called again to Washington to investigate a scandal. It is apparent that Brown does not question if more scandal is coming, but only when.
“I had a colleague look at me and ask when I would be back (in Washington), and what the next crime will be,” Brown said with a sarcastic laugh. “We’ll see.”
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