Courtesy of Pam Martens
James Kidney, Former SEC Attorney
A jaw-dropping video of a lecture James Kidney delivered at Lake Forest College outside of Chicago on October 12 arrived in our incoming email last Friday. The courage and frankness of that lecture took our breath away. It has also, no doubt, caused major ripples among the top brass at what is supposed to be the nation’s most formidable Wall Street cop, the Securities and Exchange Commission (SEC).
In the lecture, Kidney calls the leadership of the SEC when he worked there “self-serving cowards” who didn’t go after the higher ups on Wall Street following the crash of 2008 because they were simply “looking to move on, to return to their Wall Street job.” (We don’t think much has since changed at the SEC. See SEC Nominee Has Represented 8 of the 10 Largest Wall Street Banks in Past Three Years.)
Kidney was a trial attorney at the SEC for 25 years until his retirement in 2014. He had never lost a case. According to Jesse Eisinger’s book, The Chickenshit Club, which features a full chapter on Kidney, in 2001 Kidney had “won the agency’s Irving M. Pollack Award,” named after the original head of enforcement at the SEC, “for his dedication to public service.”
In other words, Kidney had enjoyed a stellar career at the SEC until one day in 2009 when a Goldman Sachs case, now infamously known as Abacus, was assigned to him. Abacus became a civil suit brought against Goldman Sachs and one of its lowly salesmen, Fabrice Tourre. Goldman Sachs settled its charges with a payment of $550 million and never went to trial. Not only did the corporation not stand trial, but neither did the American hedge fund owner, John Paulson, who, according to Kidney, plotted with Goldman Sachs to create a bundled pool of assets designed to fail so that he could make $1 billion betting against it (known as shorting). Unsuspecting investors lost approximately the same $1 billion that Paulson’s hedge fund made.
Tourre was found guilty by a Manhattan jury on six out of seven fraud counts and agreed to pay more than $825,000 in fines. He was never criminally charged and did not go to jail.
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