Today’s New York Times reports the latest example of contract laws that enable criminal conspiracies to loot businesses, fleece investors and drain the US Treasury. The article “Freddie Mac’s Secrecy Pacts Face Court Test”, describes how managers of Freddie Mac, thus far bailed out by taxpayers to the tune of $50 billion, required employees to sign secrecy agreements in return for juicy severance packages; in effect buying their silence about corrupt or criminal activity within the organization. This is an all too common practice; for example secrecy agreements protected tobacco company executives for decades as they lied that tobacco didn’t cause cancer and that they weren’t advertizing to children. Sad to say, the only unique aspect of this case is that Federal Regulators in the Federal Housing Finance Agency are trying to enforce those secrecy agreements against lawsuits brought by deceived investors.
Frankly, I think all such agreements should be illegal and some of them ought to be prosecuted under RICO statutes. Their continued existence illustrates how thoroughly our political system has capitulated to commercial interests, partly bought and paid for by contributions and partly due to a fanatic, but irrational, faith in the myth of “laissez faire” capitalism.
It is important that business operate with a primary focus on providing competitive goods and services at a profit with a minimum of government interference. I was a CEO for 16 years. I thoroughly understand the argument for secrecy agreements regarding strictly competitive information. However, under my leadership, no employee or ex-employee signed a secrecy or non-compete agreement― even though our lawyers urged me to impose such agreements― and we did just fine in a highly competitive hi-tech global market.
I also understand that the Federal Regulators think they are protecting the interests of taxpayers against those of (allegedly) deceived investors. Yes, they might save some taxpayer dollars in this case, but the consequences of protecting racketeering by management in financial institutions and public corporations throughout the country are far more damaging. We need to throw out corporate garbage, not have it rot within the walls of major corporations while economic parasites feast.
Employment or severance contracts which effectively hide evidence of corrupt or criminal activities should be null and void, and the individuals who signed them should be free of any and all obligations to withhold evidence.
I wonder if this case will go to the Supreme Court? If so, will it decide for the best strategic interests of society or in favor of moneyed interests? I’m not sure. If they decide the Citizens United Case in favor of unlimited corporate contributions to political campaigns, then I suspect that they would decide to enforce bribe induced secrecy. We shall see.
