Monday, December 6, 2021
Sam Buell (Duke), a former federal prosecutor and criminal law expert, writes:
I was amused by your post about Porat and Temple. Last year on the exam in my Corporate Crime course I gave the students the Porat indictment and asked them to analyze the case. No winning defense available, of course, but many of the students rightly explored the possibility of using the issue of USN’s many opacities and faults as a complicating argument, either on the issue of materiality or on the issue of intent to defraud. (Almost every corporate crime involves some kind of private or public regulatory body which can be blamed for not doing its job and essentially creating the opportunity for the criminality.) I also asked the students to analyze the question of whether a prosecutor should consider charging Temple or at least requiring them to enter into some kind of settlement with remedial measures. Lots to say there.
On your point about charging USN, maybe I should have asked that too (though I would have needed to give the students a lot more background facts). That’s a tougher hill to climb. USN as a supposed publication has no special duty with regard to its consumers, so failure to disclose fully how it makes its sausage can’t be a basis for a fraud case, especially not criminally. One would have to point to an affirmative misrepresentation about their rankings process (or perhaps a concealed change in methodology that renders prior standing representations misleading). Maybe there is such evidence? I don’t know but haven’t seen it. There is a potential analogy here to the credit rating agencies (S&P et al) who have, at least until very recently, been highly successful in getting courts to see them as akin to the media and merely sellers of opinions, rather than the quasi-regulators that they effectively have become. Their role in the MBS market and its collapse is a familiar story to all of us now.
You might be interested in a case I include in chapter 2 of my textbook (downloadable for free at https://buelloncorporatecrime.com) that is civil not criminal, but involves post-financial crisis claims by students against New York Law School for misrepresentations about employment data. The court dismissed the fraud claims, on a similar lack of duty analysis, finding no actual lies.