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Trump administration rigging the game, and your retirement fund could be the loser

Trump administration rigging the game, and your retirement fund could be the loser
© Greg Nash

Given his calamitous exit from the State Department, you may have thought that the days of Donald TrumpDonald John TrumpKey takeaways from the Arizona Senate debate Major Hollywood talent firm considering rejecting Saudi investment money: report Mattis says he thought 'nothing at all' about Trump saying he may leave administration MORE doing favors for former Secretary of State Rex TillersonRex Wayne TillersonTrump administration rigging the game, and your retirement fund could be the loser Haley’s exit sends shockwaves through Washington Turkey-Russia Idlib agreement: A lesson for the US MORE were over. But Trump’s administration seems poised to hand Tillerson — and his former employer, ExxonMobil — a golden pass that could ultimately save them millions.

Not surprisingly, Trump’s gift to Tillerson could come at a huge cost for everyone else.

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According to the New York Attorney General’s office, Exxon may have defrauded countless investors by inflating the value of its oil and gas reserves in 2016 (when Tillerson was still at the helm). According to court documents, Exxon allegedly misled investors when it told them it was using one calculation that showed its reserves high and its stock inflated when, in fact, the true calculation showed something very different.

At the time, Exxon reportedly was desperate to maintain its AAA credit rating while it issued a $12 billion bond offering. The company, stock holder claim, knew the bond would be necessary to keep it afloat once executives, including Tillerson, were forced to acknowledge the truth and write down the inflated values of their reserves.

One month later, Exxon’s credit rating was downgraded, and a few months after that the company disclosed it might have to write down 20 percent of its oil and gas assets that were no longer profitable.

The subsequent investigations into Exxon’s scheme sent the company’s stock plummeting, erasing billions of dollars. Among the investors hard hit by Exxon’s falling value was the Greater Pennsylvania Carpenters Fund. The Fund — like pension funds for teachers, police and firefighters — invested in the company on behalf of its members saving for, or living off of, retirement.

Suddenly, as Exxon’s stock plummeted – because of a scheme allegedly cooked up by Tillerson and other Exxon executives – the Carpenters Fund was dwindling. That’s when investors filed a class action suit, looking to hold Exxon and Tillerson accountable for the assault on their members’ retirement savings.

Such suits have long been used by pension funds and other investors to help keep companies, like Exxon, honest. And for decades, the Securities and Exchange Commission has prohibited companies from using tricks — such as forced arbitration clauses — to avoid accountability in the courts. That policy has been critical in ensuring the integrity of stocks and, when companies cheated, in recovering billions for investors who were defrauded.

But Trump’s SEC is, according to press reports, “laying the groundwork” to reverse those longstanding policies and allow corporations to sneak forced arbitration clauses into their initial public offerings or charters. SEC Commissioner Hester Peirce — a Trump appointee — has even publicly endorsed allowing companies to slip these clauses into their charters, which could let companies block investors from court without even seeking approval from the Commission first.

These moves are so brazen, and so rife with danger for retirees and other investors, that Rep. Carolyn MaloneyCarolyn Bosher MaloneyTrump administration rigging the game, and your retirement fund could be the loser The Hill's 12:30 Report — Sponsored by Delta Air Lines — Senate panel to vote on Kavanaugh today | Dems walk out in protest | Senators to watch Live coverage: Senate Judiciary to vote on Kavanaugh confirmation MORE (D-N.Y.) called them “a stealth attempt by the Commission to circumvent . . . the fundamental rights of shareholders.”

The Carpenters Fund’s case against Exxon and Tillerson shows why.

In August, the Commission dropped its investigation into Exxon Mobil and declined to pursue any action against the company, despite extensive evidence that the company lied to artificially inflate the value of its reserves.

But the Fund’s court case continues, making it the only way investors are likely to recover any of the money they lost as a result of Exxon’s actions. Indeed, the class action recently survived an attempt by Exxon to have it thrown out of court, with the court finding that the suit “contains numerous allegations to support [the plaintiffs’] contention that Tillerson, chairman of the board and chief executive officer, had knowledge of ExxonMobil’s alleged fraudulent activity.”

So while Trump’s SEC has already given Tillerson a get out of jail free card on their end — and seems on the cusp of mass producing such gilded favors for corporations and corporate executives — the courts are now the very last bastion of justice for those who have been cheated, defrauded and ripped off.

If the SEC also succeeds in permanently taking away the right for groups like the Carpenters Fund to go to court, it will be open season on retirement savings while Wall Street becomes something out of the wild, wild west.

That might be good news for Rex Tillerson, but it would mean that the rest of us get screwed.

Paul Bland is executive director at Public Justice, a national public interest law firm that works to protect environmental sustainability efforts and challenge predatory corporate conduct and government abuses.