Best of the Blogs: The Ernst & Young Case

It’s not really my area, but I’ve been especially interested this week in reading about the new civil fraud case brought by the State of New York against Ernst & Young.  The case arises from E&Y’s auditing work for Lehman Brothers, an early and important casualty of the financial crisis.  In this post, Matt Taibbi explains the basics of the Repo 105 transactions that Lehman used to hide its precarious financial position.  E&Y is now in trouble for signing off on Lehman’s questionable accounting statements.

For some helpful commentary on E&Y’s expected defense, see this post by Caleb Newquist at Going Concern.  In essence, E&Y’s position seems to be that it cannot be held liable under the New York law because it was Lehman, not E&Y, that produced the misleading financial statements and that used the statements to sell billions of dollars of securities before the collapse.  Apparently, there is no precedent under the state law for the prosecution of an accounting firm based on its role as an auditor, so the courts may have to wrestle with some difficult questions in the case.

What particularly interests me about the case is the way it echoes the prosecution of Arthur Anderson, which destroyed the venerable accounting firm as a result of its role in the Enron collapse.  

Continue ReadingBest of the Blogs: The Ernst & Young Case

Neighborhood Councils as Antidote to Minority Political Marginalization?

In many of America’s major cities, a sense of hopelessness and cynicism discourages political participation, especially by members of minority groups.  Disengagement, in turn, undermines accountability and facilitates corruption, which exacerbates public cynicism. 

How can the vicious circle be broken?  In a new paper on SSRN, Matt Parlow argues that neighborhood councils — “new substructures of local government that aim to involve citizens in the decision- and policy-making processes” — have the potential to raise the engagement level of minority citizens with local government.  He uses Detroit to illustate the problems of local government corruption and minority political marginalization in American cities, while pointing to Los Angeles as an example of a city that has had some recent success with neighborhood councils. 

Continue ReadingNeighborhood Councils as Antidote to Minority Political Marginalization?

On Opportunity

A good friend of mine once told me that hitting the ball into the sand trap on the golf course should be looked at in one way, and one way only: an opportunity — an opportunity to get better at something that you may not excel at, but nonetheless must be able to master to become great.

Opportunities abound.  Everyone, regardless of profession, has opportunities to do something in this world that is important.  The problem as I see it, is that all too often people are too afraid to see the opportunities in front of them. They figure their ball went into the bunker,  and they have no way to get out.

As practitioners of the law, we have a very unique opportunity to help people.

Continue ReadingOn Opportunity