Showing posts with label Corporate dentistry criticized for unethical practices. Show all posts
Showing posts with label Corporate dentistry criticized for unethical practices. Show all posts

Sunday, November 17, 2013

It’s hard to pin fraud on top executives in big complex companies! Poppycock, says Judge Jed Rakoff

This may seem to have nothing to do with corporate dentistry and fraud, but you would be wrong.
Judge Rakoff Blasts Breuer, Prosecution of Companies Rather than Individuals in Bar Speech

Thursday, November 14, 2013

naked capitalismAbsent sitting on the Supreme Court, it is difficult for a single judge to effect much change. Yet Jed Rakoff, in sending the SEC back to the woodshed in two separate cases over its failure to get factual admissions, meaning admissions of misconduct, on civil settlements of SEC cases, singlehandedly embarrassed the SEC and the Department of Justice into seeking these statements (for instance, numerous media reports indicate that the Administration wants that sort of confession as part of its pending settlement with JP Morgan).

Rakoff threw down another gauntlet in a New York Bar Association speech on Tuesday. I’m taking the liberty of quoting it at length because his rebuke is a breath of fresh air and roused the Department of Justice to issue a “we really are doing our job” response.

But if, by contrast, the Great Recession was in material part the product of intentional fraud, the failure to prosecute those responsible must be judged one of the more egregious failures of the criminal justice system in many years.

Rakoff then pointed to the fact that the FCIC and numerous government officials had discussed fraud in connection with the crisis and went further:

While officials of the Department of Justice have been more circumspect in describing the roots of the financial crisis than have the various commissions of inquiry and other government agencies, I have seen nothing to indicate their disagreement with the widespread conclusion that fraud at every level permeated the bubble in mortgage-backed securities.

He then goes through their litany of excuses (his word). Ooh, it’s hard to pin fraud on top executives in big complex companies! Poppycock, says Rakoff:

Who, for example, were generating the so-called “suspicious activity” reports of mortgage fraud that, as mentioned, increased so hugely in the years leading up to the crisis? Why, the banks themselves. A top level banker, one might argue, confronted with increasing evidence from his own and other banks that mortgage fraud was increasing, might have inquired as to why his bank’s mortgage-based securities continued to receive triple-A ratings? And if, despite these and other reports of suspicious activity, the executive failed to make such inquiries, might it be because he did not want to know what such inquiries would reveal?

This, of course, is what is known in the law as “willful blindness” or “conscious disregard.” It is a well-established basis on which federal prosecutors have asked juries to infer intent, in cases involving complexities, such as accounting treatments, at least as esoteric as those involved in the events leading up to the financial crisis. And while some federal courts have occasionally expressed qualifications about the use of the willful blindness approach to prove intent, the Supreme Court has consistently approved it.

The second, “weaker” excuse came out of Lanny Breuer’s mouth in his notorious Frontline interview: that the investors in mortgage-backed securities were sophisticated; it would be hard to prove they relied on ratings and fraudulent misrepresentation. Rakoff basically says that Breuer is a crappy lawyer:

Actually, given the fact that these securities were bought and sold at lightning speed, it is by no means obvious that even a sophisticated counterparty would have detected the problems with the arcane, convoluted mortgage-backed derivatives they were being asked to purchase. But there is a more fundamental problem with the above-quoted statement from the former head of the Criminal Division, which is that it totally misstates the law. In actuality, in a criminal fraud case the Government is never required to prove reliance, ever. The reason, of course, is that would give a crooked seller a license to lie whenever he was dealing with a sophisticated counterparty. The law, however, says that society is harmed when a seller purposely lies about a material fact, even if the immediate purchaser does not rely on that particular fact, because such misrepresentations create problems for the market as a whole.

The third excuse is that prosecution might hurt the economy. Rakoff indicated his discomfort with the “too big to jail” idea, but used that to lambaste the notion of prosecuting institutions as opposed to individuals. No institution would perish if an executive were prosecuted.

Rakoff carefully and pointedly says he’s not accusing prosecutors of revolving-door corruptions and that prosecutors maximize their value in the post-government service market by collecting scalps. Whether of not he actually believes that to be true, he has to say that or risk never hearing a big securities case ever again, in that both defendants and regulators could ask to have cases assigned to other judges based on the notion that Rakoff had said that prosecutors were soft of big corporate crime because they were currying favor with prospective future employers. Notice, by contrast, the cautionary example of Judge Shira Scheindlin, who had a ruling opposing New York City’s stop and frisk rules overturned because she violated the code of conduct for Federal judges by showing partiality.

But he point out other reasons why no one could be bothered to go after the conduct that wrecked the economy. The best US Attorney’s office, the Southern District of New York, was busy on the Rajaratnam case. Any smart prosecutor would ride that horse, which was ready to go, rather than take on the slog of a case that was years away from being files. So basically, with Congress starving the SEC of budget and making it capable only of handing out parking tickets in the form of insider trading cases, SDNY staffers were incentivized to go after the comparatively easy cases the SEC threw over the transom rather than pursue far more important crisis-related cases. Rakoff argues the other reason for the government’s reticence to prosecute is that it would embarrass government officials and expose policy failings.

And Rakoff described why prosecuting companies, rather than targeting individuals, produces lame outcomes:

But if your priority is prosecuting the company, a different scenario takes place. Early in the investigation, you invite in counsel to the company and explain to him or her why you suspect fraud. He or she responds by assuring you that the company wants to cooperate and do the right thing, and to that end the company has hired a former Assistant U.S. Attorney, now a partner at a respected law firm, to do an internal investigation. The company’s counsel asks you to defer your investigation until the company’s own internal investigation is completed, on the condition that the company will share its results with you. In order to save time and resources, you agree. Six months later the company’s counsel returns, with a detailed report showing that mistakes were made but that the company is now intent on correcting them. You and the company then agree that the company will enter into a deferred prosecution agreement that couples some immediate fines with the imposition of expensive but internal prophylactic measures. For all practical purposes the case is now over. You are happy because you believe that you have helped prevent future crimes; the company is happy because it has avoided a devastating indictment; and perhaps the happiest of all are the executives, or former executives, who actually committed the underlying misconduct, for they are left untouched.

Sunday, July 28, 2013

Corporate dentistry criticized for unethical practices, unnecessary procedures

Anniston Starby Eddie Burkhalter

Jul 28, 2013

When Quintoya Seawright’s 3-year-old daughter, Destiny, chipped a baby tooth in November 2010, the young mother took her to the Small Smiles clinic in Montgomery. Quintoya, 25, would end up taking her daughter to the clinic four times that month.

On the last visit on Nov. 9, her daughter was strapped to a board for an hour while the dentist struggled to place two stainless steel caps on baby teeth while her daughter screamed and struggled, saying she could still feel it, the family said.
But without much money, the young mother had to rely on Medicaid to pay for her daughter’s care. Small Smiles specializes in treating children eligible for Medicaid. The company operates another clinic in Dothan.

The large dental chain is owned by a private equity firm and is managed by Nashville-based CSHM LLC. A report released by the U.S. Senate Finance Committee last week claims Small Smiles and clinics like it are motivated by profit, often performing unnecessary procedures, and should be removed from the Medicaid program.

The report also says the clinics are operating in violation of laws in 22 states, including Alabama, that ban anyone other than a licensed dentist from owning a practice. The report states that CSHM actually owns and operates the clinics, and not the “owner” dentists the company enlists to skirt to get around those state laws.

Quintoya said she was never allowed to go back with her daughter to watch the procedures at Small Smiles, but the 3-year-old girl’s grandmother, Sophia, demanded she be allowed on the girl’s last trip.

Destiny began pulling at her mouth, so workers strapped her arms and legs to the board, then the dentist struggled for an hour to place the two caps on the tiny baby teeth while Destiny “kept saying she still felt it. He said, ‘No. She’s numb. It’s just the noise,’” said Sophia.

“Her heart was just beating so fast,” Sophia said. “The lady was holding her head down and was trying to get her to open her mouth by squeezing her nose.”
Destiny had a total of five stainless steel caps placed on baby teeth over four visits. One cap fell out along with the tooth a couple weeks later. Quintoya said she never heard the dentist say her daughter had cavities in those teeth, but he said the caps would help prevent them from forming.

“I’m not sure if it was a necessity to have all those silver things in her mouth,” Sophia said.

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