By: Donald V. Watkins
Copyrighted and Published on May 29, 2023
An Editorial Opinion
Only after I began researching the decades-long racketeering enterprise and massive $27 billion accounting fraud scheme at the Atlanta-based Southern Company in a series of articles published between January 27 and May 23, 2023, did I realize that ripping-off publicly traded companies has become the newest hotbed of criminal activity.
Encompass Health’s payments of over $100 million to the Birmingham, Alabama-based of Bradley Arant Boult Cummings, LLP (“Bradley Arant”) to collect $33 million on a $2.9 billion civil court judgment against former HealthSouth CEO Richard Scrushy solidified my belief in this regard.
The payment of more than $100 million to collect $33 million on a civil debt made me realize that no one is safeguarding the financial interests of shareholders in these publicly traded companies. The executive officers in charge of these public companies can waste, mismanage, pilfer, and/or steal hundreds of billions of dollars in corporate funds each year, with no worries at all.
Show Me the Public Money and I Will Show You Who is Stealing It, and How They are Doing It
The amount of market value and cash held in publicly traded companies is obscene. What is more, the CEOs of these companies make over a hundred times what their employees get paid in annual salaries.
In the Southern Company’s case, for example, former CEO Thomas A. Fanning’s total compensation for 2022 was more than 167 times the median annual pay of $143,500 for a Southern Company employee.
The total market capitalization of the U.S. stock market was $40,511,838,800,000 (rounded off to $40.5 trillion), as of December 31, 2022. The market value is the total market cap of all U.S. based public companies listed in the New York Stock Exchange, NASDAQ stock market or OTCQX U.S. market.
In 2022, publicly traded companies were sitting upon $5.8 trillion in cash, according to Mitchell Petersen, a finance professor at Northwestern's Kellogg School of Management.
In contrast, the U.S. government’s budget for the fiscal year that began on October 1, 2022, and ending on September 30, 2023, is $6.2 trillion. The state of Alabama’s budget for 2022 was $35.5 billion. The city of Birmingham’s budget for the fiscal year that began on July 1, 2022, and ends on June 30, 2023, is $517 million.
On any given day, the aggregate amount of market value. liquid assets, and cash held in these publicly traded companies dwarfs the annual money appropriated to these three government entities.
Yet, nobody is paying attention to how the corporate executives of public companies in America mismanage, pilfer, and/or steal this public money -- not the U.S. Department of Justice, nor the U.S. Securities and Exchange Commission, nor the Federal Trade Commission, nor state attorneys general, nor state securities commissions.
Nobody is watching these Wall Street crooks, and they know it. As a result, many of the top executives of these public companies are looting them in displays of unparalleled greed and corruption.
The unreported and undisclosed “insider” deals among the executives and board members of publicly traded companies have mushroomed to epic proportions and are limited ONLY by the imagination of the greedy executives who run these companies.
Unlike government agencies, there are virtually no private oversight groups or public “watchdog” organizations guarding this Wall Street money.
Executives at public companies, along with many of their board members, are feasting off this abundance of corporate cash like there is no tomorrow.
The Department of Justice Refuses to Prosecute Crooked Wall Street Corporations and Their Top Executives
There is virtually no federal law enforcement activity with respect to New York Stock Exchange/Fortune 500 companies and other publicly trade companies. Their executives are mostly immune from federal criminal prosecution, as well.
Starting with the Barack Obama administration, these public companies were deemed “too big to prosecute.” This gave them the freedom to do as they pleased.
Instead of prosecuting Wall Street crooks, the Department of Justice has focused on the prosecution of street criminals and small-time politicians like former Alabama state representative Fred Lee Plump, Jr.
Plump was charged on May 23, 2023, with one count of participating in a $400,000 federal wire fraud conspiracy and one count of obstruction of justice. Plump pled guilty on the same day.
Prosecutors and defense attorneys call criminal cases like Plump's “low hanging fruit.” Ninety-nine percent of the criminals swept up in these cases plead guilty. Those who go to trial are usually convicted.
On May 27, 2023, we broke the story of how Bradley Arant has ripped-off Encompass Health for more than $100 million in legal fees since 2009. As expected, there has been no criminal investigation into this rip-off scheme by federal prosecutors because Encompass Health is a New York Stock Exchange/Fortune 500 company and Bradley Arant is considered a “blue-chip” regional law firm.
Furthermore, Lloyd Peeples, who heads the Criminal Division of the U.S. Attorney’s Office in Birmingham, is a former Bradley Arant law partner. Peeples has never prosecuted a New York Stock Exchange/Fortune 500 company for any crime.
Lloyd Peeples has given Wells Fargo Bank, which operates in Birmingham, a prosecutorial "pass" for the bank's nationwide crime spree and 230 major violations of laws since 2000.
Since 2009, two Bradley Arant partners have served as general counsel of Encompass and its predecessor, HealthSouth Corp. The first one was John P. Whittington, who was general counsel from 2006 to 2016.
Patrick Darby succeeded Whittington as general counsel in 2016. Darby was a Bradley Arant partner, as well.
Rather than hiring Bradley Arant on a standard 15% contingency fee contract for Encompass Health’s debt collection work on the court judgment in Richard Scrushy’s case, Whittington and Darby chose to reward Bradley Arant with an open-ended “fee for services” contract that has enriched their old law firm by over $100 million.
Despite spending more than $100 million to collect about $33 million on the Scrushy judgment, the firm has not collected one dime of money from Richard Scrushy in the last 10 years that can be credited towards the Encompass civil judgment.
In recent years, the only beneficiary of Bradley Arant’s debt collection work in the Scrushy case has been the Bradley Arant law firm itself. Whittington and Darby placed their old law firm on the gravy train of a lifetime -- at the expense of Encompass Health's shareholders.
So, what is former Bradley Arant law partner Lloyd Peeples doing about this situation? Peeples has turned a blind eye to this rip-off scheme. He is part of Birmingham's "Good Ol' Boys" network.
Remember, Lloyd Peeples’ only hands-on experience in running a business involved a failed pizza restaurant he owned and ran for 11 months prior to joining the U.S. Attorney’s office in 2017 after his pizza business crashed.
What is Prim F. Escalona (U.S. Attorney for the Northern District of Alabama) doing about the Encompass Health-Bradley Arant rip-off scheme? Absolutely nothing.
After all, Ms. Escalona is a Donald Trump “laissez-faire” holdover appointee who is poised to serve throughout President Joe Biden’s presidency for reasons that no one can explain.
Meanwhile, these Birmingham federal prosecutors are pounding their chests and salivating over the guilty plea in Fred Plump’s $400,000 wire fraud conspiracy case.
Not one of these prosecutors has exhibited the courage needed to investigate and prosecute the Encompass Health-Bradley Arant $100 million rip-off scheme.
The SEC Has Been Asleep at the Wheel for Decades
As was the case with the infamous Bernie Madoff fraud scheme, the SEC has been asleep at the wheel with respect to the Southern Company's racketeering and massive $27 billion accounting fraud case and the Encompass Health-Bradley Arant $100 million legal fees rip-off scheme.
Bernie Madoff was a New York financier who executed the largest financial fraud crime in history, via a sophisticated Ponzi scheme. Madoff defrauded thousands of investors out of at least $64.8 billion over the course of 17 years.
On December 11, 2008, FBI agents arrested Madoff and charged him with one count of securities fraud.
The SEC had previously conducted multiple investigations into Madoff's business practices, but the Commission had not uncovered the massive fraud. In 2000, financial analyst Harry Markopolos filed a “whistleblower” complaint with the SEC that was ignored. It wasn’t until five years later, in 2005, that Markopolos was able to convince the SEC of Madoff’s financial crimes.
On March 12, 2009, Bernie Madoff pleaded guilty to 11 federal felonies and admitted to turning his wealth management business into a massive Ponzi scheme. Madoff was sentenced to 150 years in prison and required to forfeit $170 billion. He passed away in prison on April 14, 2021.
Like the Madoff case, the SEC has paid no attention to Bradley Arant’s brazen $100 million rip-off of Encompass Health in connection with its judgment collection work in the Richard Scrushy civil case. Why would it? After all, the agency, itself, was scolded by a federal judge in a May 7, 2003, published opinion for its egregiously violations of Scrushy’s constitutional rights. It does not appear that the SEC gives the 10-Qs and 10-Ks of Encompass Health, the Southern Company, and other publicly traded companies anything more than a cursory glance. Furthermore, no honest and competent SEC enforcement official would condone Bradley’s $100 million rip-off of Encompass Health.
Epilogue
There is no indication that the federal law enforcement establishment is willing or prepared to take on big-time Wall Street crooks or a law firm like Bradley Arant.
Attorney General Merrick Garland is retired in the job he was given as a consolation prize for not getting the U.S. Supreme Court seat that Obama promised him. Meanwhile, President Joe Biden is busy learning how to walk without stumbling.
The SEC’s Enforcement Division staff is an embarrassment to itself and the Commission. The Division consists mostly of lawyers who are too washed up to go into private practice. If deferential and ingratiating federal judges did not show these government lawyers preferential treatment, the Division would likely lose nearly all of its enforcement cases.
Within this sad paradigm, the pilfering and theft of corporate money from the coffers of publicly traded companies will continue to skyrocket. This cookie jar replenishes itself, it is wide-open, and no one is stopping this kind of pilfering and theft of shareholders' money.