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The Racketeer Influenced and Corrupt Organizations Act (RICO) closed a loophole which enabled crime bosses to get away with murder by merely ordering, or even suggesting, for crimes to happen. Despite the difficulty in proving a RICO case, those who engage in such acts continue to blame the law for their own criminal actions. RICO has been used to ensure convictions against tobacco giants and Mafia bosses. It is not an easy conviction, requiring an awful lot of paperwork, warrants, informants, etc. As discussed on Law and the Multiverse, a lighthearted look into the legalities of comic book characters, the difficulty in ensuring a RICO conviction is incredibly hard in the real world.
EToys Liquidation Or Con Game? One Man’s Fight To Make Sure Mitt Romney Pays For His Crime.
Stephen “Laser” Haas operates Collateral Logistics Inc. (CLI) a company which was appointed to oversee the liquidation of assets in the bankruptcy of EToys in 2001. He has now filed suit against Mitt Romney along with his company Bain Capital, Goldman Sachs, and several other firms, over actions taken in the EToys bankruptcy which manipulated the sale price, costing the companies shareholders millions. A US Judge confirmed the details of the case back in 2005, but under the Bush administration enforcement of these laws was lackluster at best. Bain Capital has already found itself in hot water over similar price-fixing scandals, but this case comes with paperwork implicating the one time GOP presidential nominee of price manipulation.
According to the affidavit by Mr. Haas, his firm found many accounting irregularities which he reported to US Attorney Colm F. Connolly. However, instead of acting, the issues were ignored. It turned out that Mr. Connolly failed to recuse himself from the caseretroactively retired from Bain Capital. The failure of Mr. Connolly to enforce the RICO statute has landed him a spot on the lawsuit, right next to Mr. Romney.
Covert Price Fixing Hurts Us All.
This form of manipulation is not a victimless crime, as some have claimed. It impacts each of our lives, some very dramatically. By manipulating the price, value for the shareholders was not preserved. That in turn limited the capital available to invest elsewhere. Repeat this process a few hundred times, you reduce liquidity in a market significantly. This is how economies crash.
Of course for firms like Bain and people like Mitt Romney, that does not matter. So long as they got theirs, the rest of us can all hang. They live in an isolated intellectual bubble, and fail to comprehend that their actions have consequences. Or perhaps they do comprehend, and they just don’t care.
Perhaps some justice for the shareholders of EToys, and for the public trust, would do some good. It may be late, but better late than never.
Will Mitt Romney Face Justice?
The actions of Mitt Romney and his co-conspirators wiped out hundreds of millions in equity. They were denied proper value for their investment in the company, which was sold to Bain owned KB Toys for $5 million, less than half of a sale just a few months prior of EToys subsidiary BabyCenter.com.
This was also a price incredibly low, considering that despite its bankruptcy filing, EToys was still generating revenue of $131.2 million the previous quarter. Despite having a profit, the debts incurred in EToys drive for web dominance at the end of the 1990′s were sapping its financial strength. The company had filed bankruptcy to allow for it to restructure its debt payments, and had it gained such an arrangement, such as is normal with firms in their position, it is highly likely that EToys would have continued operation.
Instead, the company found itself a financial pariah, and was forced into liquidation. Unable to secure the line of credit to bridge the gap they had foreseen, it was sold off to the only bidder, Bain Capital. By conspiring to cut off EToys ability to handle its debt, Goldman Sachs has already agreed to settle one case brought against it.
Attempts to settle with Mr. Haas, however, have failed so far. He is a man on a mission, with his professional credibility on the line. He is the David standing against the Wall Street Goliath. Will his aim be true?