This is a first for The Securities Edge – a book review. The book in question is The Chickenshit Club – Why the Justice Department Fails to Prosecute Executives by Jesse Eisinger. Mr. Eisinger is a writer for Pro Publica. He’s a very smart man and a good (even great) reporter; among other things, he’s won the Pulitzer Prize. I met him once and was impressed by his intellect and commitment.
However, the book bothers me greatly, and that’s why I’ve decided to post this review. As indicated by his title, he is concerned with the failure to prosecute executives, both generally and in connection with the financial collapse. That concern is legitimate; many people – including people in business – share it, and some hold the failure at least partially responsible for our political situation today. The problem with the book is that in Mr. Eisinger’s view there are heroes and villains and nothing in between; those who prosecute are good, and those who don’t (or who do so halfheartedly) are bad – and the businessmen themselves are the worst of all.
For example, among the people he idolizes is Stanley Sporkin, a retired USDC judge who previously served as the SEC’s Director of Enforcement. Mr. Sporkin’s integrity may be beyond question, but in Mr. Eisinger’s view, his judgment is (and was) as well. Those of us who practiced during Mr. Sporkin’s tenure at Enforcement may have a different view. Among other things, Mr. Sporkin was responsible for pursuing insider trading cases against Vincent Chiarella and Ray Dirks. Mr. Eisinger lauds Mr. Sporkin for going after Mr. Chiarella – a typesetter for a financial printer who saw some juicy (nonpublic) information and traded on it. Did he trade on the basis of inside information? Yes, but at the end of the day he was a schnook who should have gotten a slap on the wrist rather than being subjected to a (literal) full court press by the federal government. The courts apparently felt the same way, and, as courts often do, they found a way to let him off the hook by developing a strained approach to insider trading law that continues to haunt us today. (Mr. Eisinger doesn’t mention the equally ill-advised insider trading prosecution of Ray Dirks, which also contributed to the current garbled state of affairs in insider trading law.)