I wrote Friday about some ways to extract a pound of flesh from those who got spectacularly rich doing things that helped bring on the current financial mess. Matt Miller did me one better. He asked former shareholder lawsuit terror Bill Lerach, currently in prison in Arizona, for advice. And Lerach delivered:
[T]here is a way for the federal government to go after the obscenely excessive bonuses paid to the Wall Street pigs. One legal problem to be surmounted is that the federal government itself has no statutory authority to sue to recover excessive compensation paid officers of public companies. …
The solution to this dilemma is this. There are several entities of the federal government that one way or another own common stocks—and likely the common stock of the banks in question. The Pension Benefit Guaranty Corp. comes to mind. There are others. They will have standing to sue. They should … bring a shareholders’ derivative suit against the grossly negligent boards of directors that permitted the wasteful bonuses to be paid as well as the defalcating executives who got them. Corporate law recognizes claims for breach of fiduciary duty, gross negligence, waste of corporate assets, or abuse of control to recover excessive compensation. Any recovery would flow back to the corporate entity—but since these are now taxpayer-supported entities, the recovery would benefit the taxpayers, i.e., help banks pay back TARP money sooner!
