GUEST BLOG [In]Securities: Eggs from the Golden Goose By Aegis Frumento Esq

November 20, 2020


Eggs from the Golden Goose

Crowds don't just spontaneously start dancing in the streets of American cities. Yet, there they were when the Associated Press called the election for Joe Biden the Saturday after the election. You'd think we'd won a war. You'd think some evil Dark Lord had been vanquished. It reminded me of the closing celebrations of Return of the Jedi

But the exuberance could also have been primed by an unseasonably warm day in which to release the pent-up energy of a too-long quarantine, the election being just the spark. After all, President Trump is more Dark Helmet than Darth Vader.

Since then, Trump has been bringing lawsuit after lawsuit in an attempt to argue his way out of the reality that this time he lost by twice as many millions of votes as he lost by last time. As of this writing, 30 of 31 of election decisions have gone against him, and the one turned out to be an inconsequential gimme. Michigan has certified Biden's win there, Georgia's recount showed Biden still ahead, and Arizona and Nevada have basically told Republican interlopers to pound sand. But Trump fights on, boasting that he won after all. He reminds me of that other dark-helmed character, the Black Knight of Monty Python and the Holy Grail.

Of course, the last thing Trump would want to be is anything black. No; his color, from his tan to his hair, is Golden:

@FoxNews daytime ratings have completely collapsed. Weekend daytime even WORSE. Very sad to watch this happen, but they forgot what made them successful, what got them there. They forgot the Golden Goose. The biggest difference between the 2016 Election, and 2020, was @FoxNews!

And here I thought the biggest difference between 2016 and 2020 was that he lost.

But that aside, we're so used to the ventosity of Trump's tweets that the honesty of this one surprises. He really is the Golden Goose. How goosey is it that he won't give up in the face of impossible odds? Still, it's hard for me not to cheer Trump on as he proceeds to leave it all on the field -- honor, reputation, legacy, the future of the GOP, all of it. He could end up in Riker's Island when all this is over -- a foie gras feast for prosecutors -- so let the Goose enjoy his last goosing. 

But what of the legal goslings responsible for all those goose eggs? Now, Rudy Giuliani is taking over the President's legal strategy. Fresh off his prickly cameo in the latest Borat movie, Rudy's first act was to hold a wacky press conference at the Four Seasons -- not the ballroom of the ritzy hotel in downtown Philadelphia, but the parking lot of the gritty landscaper between a porn shop and a crematorium in North Philly. No one now, days removed from the event, remembers what he said. But there is a petition going around to list Four Seasons Total Landscaping in the National Register of Historic Places. I guess the plaque would read something like, "Here Rudy shoveled fertilizer, Nov. 2020."

And yet, there's a serious issue afoot here. All those Trump lawsuits failed because it quickly became apparent there were no facts to back them up. Lawyers aren't supposed to bring cases that have no merit. Lawyers who promote frivolous lawsuits risk both court sanctions and professional ethics violations. And bad press, too. 

I mention the last because it seems that the bad press really got to Trump's first set of lawyers. Two major firms faced such a backlash from the public and from other lawyers inside the firm, that they ultimately fled the field. That left Trump with a second string of minor celebrity lawyers. As reported in the U.K.'s Independent, "Bradley Moss, a Washington-based attorney with extensive experience in federal courts, said that the common denominator with Trump's lawyers is that they 'are more known for their TV hits and their public personas than they are for their legal prowess. . . .[Trump] likes to be surrounded by those who will feed his overarching views, who will tell him that there's legitimacy to this.' " You would expect such lawyers to be in it for the notoriety. Trump's new lawyer in Pennsylvania even published that none of the legal challenges would succeed in overturning the election. But that didn't dissuade him from signing on to do just that.

Shortly after the 2016 election, Yale historian Timothy Snyder wrote a little booklet for the Resistance titled On Tyranny: Twenty Lessons From the Twentieth Century. Surveying the last century's autocratic regimes, he distilled a set of rules to keep tyranny at bay. No. 2 is "Defend Institutions." No. 5 is "Remember professional ethics." "It is hard to subvert a rule-of-law state without lawyers," he writes. Professional ethics, when taken seriously, prevent lawyers from enabling corrupt regimes by forcing them to say "no" to unethical demands.

The New York City Bar Association put out a statement on election day reminding its members: "Whatever the pressures from clients, public officials or our own political preferences . . . our role as lawyers must never serve to undermine the bedrock electoral processes on which our democracy rests." In other words, we lawyers have a duty to defend institutions, as Snyder prescribes. But, as Snyder also points out, lawyers defend institutions best when they unite as a profession, putting their professional ethics first. Clients have a hard time understanding this. Many think that if they pay a lawyer, the lawyer must do their bidding. We don't; and sometimes we can't. 

One thing we lawyers cannot ethically do is bring frivolous lawsuits. The ABA's Model Rule of Professional Conduct 3.1, adopted in virtually all states, prohibits lawyers from bringing a claim "unless there is a basis in law and fact for doing so that is not frivolous." Federal court pleadings can lead to sanctions against lawyers who bring claims without factual support; all state courts have similar rules. Trump's lawyers may well be flouting those professional obligations. I have not personally attended all the hearings in all of Trump's lawsuits. All I know is what I read in the papers (or watch on late-night TV). But losing 30 of 31 cases is telling. The withdrawal of reputable counsel is telling. The lunacy of Giuliani's conspiracy rants is telling. What they tell is that there is no there there.

Since taking over Trump's election litigation, Rudy Giuliani has lost every case. The other day, he apparently embarrassed himself, first in a court and then in a press conference. Or maybe it was the other way around. No matter, he is reportedly still asking $20,000 a day for his "efforts." As reported, "Some Trump allies fear that Mr. Giuliani is encouraging the president to continue a spurious legal fight because he sees financial advantage for himself in it." I guess, ethics be damned, he wants an egg or two from the Golden Goose. I guess the whole gaggle of them does.



Aegis J. Frumento

380 Lexington Avenue
New York, NY 10168

Aegis Frumento co-heads the Financial Markets Practice of Stern Tannenbaum & Bell, New York City.  He represents persons and businesses in all aspects of commercial, corporate and securities matters and dispute resolution (including trials and arbitrations).  He has decades of experience representing SEC, CFTC and FINRA regulated firms and persons in regulatory enforcement investigations, hearings and lawsuits.  Drawing on his five years managing the Executive Financial Services Department of Morgan Stanley Smith Barney, Aegis has rare depth of experience in the securities and corporate governance laws affecting senior executives of public corporations.  When not litigating, Aegis enjoys working with new and existing broker-dealers, registered investment advisers, and private equity funds, covering all legal aspects from formation to capital raising. Those clients now include industry professionals looking to adapt blockchain technologies to finance and financial market enterprises, including the use of cryptosecurities to represent equity and debt interests. 

Aegis's long and distinguished career includes having been a Managing Director of Citigroup and Morgan Stanley, a partner and the head of the financial markets group of Duane Morris LLP, and the managing partner of Singer Frumento LLP.  He graduated from Harvard College in 1976 and New York University School of Law in 1979.  Aegis is a frequent author and speaker on securities law issues, and is often quoted in the media on current securities law developments.  He is the current Chairman of the New York City Bar Association's standing Committee on Professional Responsibility.

NOTE: The views expressed in this Guest Blog are those of the author and do not necessarily reflect those of Blog.

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