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View Diary: "Senator Sherrod Brown Drops a Bombshell in Mary Jo White’s Hearing," by Pam Martens (297 comments)

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    •  Pam Martens seems to be missing the distinction (23+ / 0-)

      that White presents in her statement.  The decision as to whether to prosecute is different from the decision regarding what form and level of remedy to seek should liability be established.  White notes this explicitly:

      [As] I understand it, [SEC prosecutors] don’t take collateral consequences into their charging decisions. But they do consider consequences in their remedies. So that, for example, a corporate fine that in effect would have grievous impact on innocent shareholders is taken into account in terms of remedies that they seek.
      I say that Martens doesn't seem to appreciate this implication because she later asks this question:
      Is there really an official policy that White refers to that permits the Department of Justice to let economic interests trump the prosecution of criminal acts?
      White would say, I believe correctly, that she doesn't think that there is, and that if there is there shouldn't be.  But that only speaks to the question of whether a prosecution goes forward.  (They could also reach a settlement, which I think in this context would include an admission of liability, but if it's entirely civil then perhaps not -- the targeted corporation would want to avoid it because of the implication for shareholder derivative suits.)

      What Martens and the rest of us are really concerned with, though, is not the mere fact of a prosecution, but of its subsequent deterrent effect on future law-breaking.  And that is a factor not only of the existence of a prosecution, but of the scope and severity of a penalty or "remedy."

      This question by Martens misses the point for a similar reason:

      It’s becoming crystal clear that the problem in America is not bad laws; the problem is finding someone other than deeply conflicted Wall Street lawyers to enforce them.
      Again: "enforcing the law" primarily involves the decision as to whether or not to bring charges.  Unless the law specifies a particular penalty and removes any prosecutorial discretion to reduce that penalty, the SEC or other agency can be "enforcing the law" without having what we'd consider to be an adequate deterrent effect.

      So this is a kind of a loophole -- but it's not an obviously absurd one.  Let's say that one did know that seeking a certain level of damages or a certain kind of injunctive relief (these being forms of remedies) in a given case would likely crater the world economy.  It's not entirely clear to me that a prosecutor should risk provoking a global depression just in hopes of having a deterrent effect based on the resolution of an individual case.  (And, of course, doing so makes it likely that one will lose on appeal.)

      The problem in that situation is not with the prosecution's use of discretion in seeking a certain amount of damages or type and severity of other remedy; it's with a system that allows financial institutions to become "too big to fail/jail" -- and that is not the doing of the SEC, but of Congress.  I don't think that the SEC could effectively pursue what would effectively be an anti-trust-style remedy (of breaking up the banks) in an individual case.  The defendant would fight back with everything it had.

      Disclosure: I ought to admit that I am a former Debevoise associate who worked several levels down on one or two cases that White headed, although I never have and I don't expect ever will benefit from my interactions with White.  Most of those relatively few interactions were social; I found her to be funny, charming, progressive (by "top-lawyer" standards), brilliant, tireless, and a good sport.  I've had no contact with her or with anyone regarding her since 2006; I moved on.

      I do favor White's appointment because she is among other things, a straight-shooter: if she were asked for reporting about the past use of prosecutorial discretion in seeking remedies on the part of the SEC, I believe that she would do a solid and forthright job; she's smart enough to know that "too big to fail/jail" is a huge problem and brave enough to be honest about it.  She doesn't have to go back to Debevoise or anywhere else if she doesn't want to, by the way.  She can afford to be straightforward -- and she has the sense of noblesse oblige that would facilitate it.  Given that the new SEC Director will be someone from the same milieu, she seems like as good a choice as any.

      Part of our job, though, will be to ask the right questions of her and to demand the right information.  Bearing in mind the distinction between decisions to prosecute and decisions regarding remedies will help us do so.  My apologies for going on at such length.

      Plaintiffs' Employment Law Attorney (harassment, discrimination, retaliation, whistleblowing, wage & hour, &c.) in North Orange County, CA.

      "I love this goddamn country, and we're going to take it back."
      -- Saul Alinsky

      by Seneca Doane on Thu Mar 14, 2013 at 01:13:09 PM PDT

      [ Parent ]

      •  Thanks for a clear analysis (16+ / 0-)

        This points us toward the real underlying problem which has little to do with law enforcement: the fact that any private corporate entity is allowed to become so central and pervasive that holding it legally accountable could conceivably crater the global economy.

        Nothing human is alien to me.

        by WB Reeves on Thu Mar 14, 2013 at 01:32:46 PM PDT

        [ Parent ]

      •  Excellent comment... (12+ / 0-)

        ...and perhaps just as interesting insight into your professional experience!

        That being said, what about stepping back for a moment and taking a look at the abysmal track record of the SEC, itself? (And, as I've noted elsewhere in these threads, the reality that there's a major issue with regard to underfunding/defunding the SEC, and that's been going on for decades; along with a concurrent/subsequent set of management-related issues created by all of the above that require the SEC to focus upon/salvage cash awards from as many of its efforts as possible (there's little money in putting folks in jail, etc., etc.; although a looming but rarely-invoked threat of same does entice defendants to pay up--mind you, we're talkin' about the small-fry here, historically speaking, as far as criminal charges are concerned, not so much the TBTF's, that too infrequently are threatened with a vacation in the big house).

        So, we're talking about a culture at the SEC perverted by a captured government as much as anything else, at the end of the day. And, a revolving door policy that has little incentive/reason to discourage it. (In fact, I'd say the reality's just the opposite: reinforcement of the status quo.) At least that's the way I see it.

        "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

        by bobswern on Thu Mar 14, 2013 at 01:50:43 PM PDT

        [ Parent ]

        •  "Abysmal track record is abysmal!" (0+ / 0-)

          I would never defend the SEC track record since Christopher Cox took over, although especially under this administration this is partially due to under-funding.

          I should say that relatively little of my legal experience in NYC was in the financial services area -- and the cases in which I was involved seemed (and still seem) benign to me, although of course I can't discuss them.  But I did know enough heavy hitters, Mary Jo White among them, to have a sense of who was well-intentioned and who -- let's just say "less so."  My experience with Mary Jo White suggests that she is no revolutionary, but she's seriously determined to solve social problems from a reformist perspective rather than protecting the financial industry because her former law firm (or her husband's current firm) might somehow profit from it.  For one, she's easily smart enough to understand that underregulation courts stupidity that threatens the industry from within.

          Plaintiffs' Employment Law Attorney (harassment, discrimination, retaliation, whistleblowing, wage & hour, &c.) in North Orange County, CA.

          "I love this goddamn country, and we're going to take it back."
          -- Saul Alinsky

          by Seneca Doane on Fri Mar 15, 2013 at 02:38:42 PM PDT

          [ Parent ]

      •  I like the part about concern for "innocent shareh (10+ / 0-)

        olders." Like Bankstas, and various Funds that ought to want some kind of governance, long term. The image is that Ma and Pa will be hurt. Ma and Pa have already been fucked over by the Bankstas with the collapse of their 401ks and the robbery of pension funds and the rules changes in bankruptcy and the mortgage fraud activities and sons and daughters sent to 'wars of choice' and on and on and on. Making the Bad Guys face the music, as was done with the S&L ponzi-collapse, coupled with changes to effective regulation and enforcement, are the only way to change the behaviors of the psychopaths who run the Casino.

        "Is that all there is?" Peggy Lee.

        by jm214 on Thu Mar 14, 2013 at 03:17:31 PM PDT

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        •  Exactly. Thereer's nothing "innocent" about (7+ / 0-)

          shareholders.  They take a risk when they "invest" and in return, according to the mythology, they get rewarded.  Or they lose.

          It ain't risk if it's guaranteed, if their "innocence" must be protected.

          •  wow... (2+ / 0-)
            Recommended by:
            hooper, jm214

            well, golly gee whillikers...Gotta love the free market system. can't pick winners and losers? right? right? ^%$#%^((&^%$%&$^%#

            Dems in swing districts: INSIST your republican rep incr tax on the wealthy -gerrymandering makes rep vulnerable...swing district list:

            by grrr on Thu Mar 14, 2013 at 04:47:40 PM PDT

            [ Parent ]

        •  "Shareholders" are those who make decisions to (4+ / 0-)

          invest in companies based, in part, upon statements legally required to be submitted to the SEC, etc.

          They decide to pick company A over company B because they think company A will make them more money. Or their money will be safer.  This is a risk they take, we are told, in order to maximize their returns, their investments, their earnings by playing the Wall Street game.

          If the government, then, decides to not take action based on "protecting the 'innocent' shareholders," what they are saying is that Capitalism needs Welfare.   They are saying that the Government must prop up investors in the most capitalistic of schemes: researching, choosing, deciding upon and buying stocks.

          Thus, capitalism is invalid,
          because enforcement of the law to ensure:
          1) honest reporting,
          2) honest transactions, and a
          3) transparent marketplace would
           "damage shareholders capitalism itself."

          She just testified that capitalism doesn't work. At least honest, above-board capitalism where companies are required to conform to the law.

          "The law is meant to be my servant and not my master, still less my torturer and my murderer." -- James Baldwin. July 11, 1966.

          by YucatanMan on Thu Mar 14, 2013 at 10:21:43 PM PDT

          [ Parent ]

      •  There has never been any evidence (12+ / 0-)

        convincing enough to suggest that prosecuting one or more of these firms would cause any mass economic damage much less a collapse of the entire world economy.

        Along those lines there has been nothing to suggest that prosecuting the CEOs and other C-Suite officers individually and having them removed would have any effect what so ever as many people seem to believe. In order to believe that one would have to believe that the CEOs should be immunized against death , disease and say a heavy piece of artwork falling on their heads.

        But lets not chance it and look at some examples. On 9/11 many of the 3000 killed were bankers. There were large firms, some of them primary dealers , that were decimated in terms of personnel from this tragedy. Did the world economy or even the US economy blow up? Not unless someone tried to argue that the relatively mild recession we had after the tech bubble was solely due to bankers being killed during 9/11.

        Have we already forgot the Vikram Pandit  and his predecessor have been fired from Citibank , one in 2008 as the crisis began and the other last year? Not only that but the one and only Bob Rubin was forced to resign from Citibank. While this was only one bank, this bank consumed more Govt funds than any other of the TBTF banks. Not only did they get 45 Billion from TARP, but we guaranteed 300 Billion dollars of mortgage loans that they had outstanding. Citibank has used, at last count , 240 Billion of that. That was a injection of capital. Those weren't GOVT loans to Citibank. They were a Goddamn Guarantee of the assets on their balance sheet.  

        One Side note that is worth taking into account when considering this new revelation; The HAMP program that was announced with great fanfare as a huge program to help mortgage holders was a miserable failure. No one really explored why. I always wondered why there had been so many screw ups in the administration of this program and why no corrective action was taken.

        According to Neil Barofsky, SIG TARP and author of Bailout", It turns out that the Banks who serviced those mortgages made a crap load of money collecting the trial payments, and the fees, and then foreclosing anyway. The reason was simple. The Bank servicers gets all the fees they would have been paid if the Mortgage went to term from the liquidation of the collateral. The Bond Holders who had MBS ( Mortgage Backed Securities) received a pittance to nothing at all as the homes were sold on the cheap. Apparently at a cost that was enough to at least cover the servicers fees.

        So instead of wondering if the Banks would inflict great harm to our economy, why not look at it this way: They already have and are inflicting great harm to our economy by death of a thousand cuts. Prosecuting them would have a much greater chance of stopping economic harm then causing it to increase.

        If nothing else, once we take fraud out of the equation by using the Rule of Law, people will be able to trust the financial statements of large corporations again which would put a firm bottom in the housing market, and the stock market. The market has been going up on thin air and for no reason. If people are in the market now they probably should consider what artificial stimulus means to the long term health of their retirement plan.


        •  That's what I don't get (7+ / 0-)

          How will prosecuting banksters crash the economy????
          I really would like to know the reasoning behind that.


          by jennybravo on Thu Mar 14, 2013 at 05:35:28 PM PDT

          [ Parent ]

          •  What you'll find behind that door isn't reason. (3+ / 0-)
            Recommended by:
            marty marty, happymisanthropy, Dburn

            It's rationalization.

            income gains to the top 1% from 2009 to 2011 were 121% of all income increases. How did that happen? Incomes to the bottom 99% fell by 0.4%

            by JesseCW on Thu Mar 14, 2013 at 07:04:23 PM PDT

            [ Parent ]

          •  Each CEO and CFO is a holy and irreplaceable (4+ / 0-)

            person.  If one of them were to be imprisoned, the heavens would open and rain down boulders on the heads of the poor.

            They must be protected at all costs.  We have no one - absolutely no one - who can do their jobs in their place.  No one more honest.  No one more moral.  No one more responsible.  

            There is absolutely no one in the entire world who would or could take the place of each of these holy princes of capitalism.  If one, or heaven forbid 800+ (as in the Savings & Loan scandals of the Reagan-Bush era), were to be convicted and sentenced to prison, the earth would tremble and cities would be swallowed into hellfire and damnation.

            That is exactly why we cannot prosecute these crooked bastards and they're sick and tired of having to explain themselves to the peasants, peons, hoi polloi, and proletariat. They're just sick of those low-lives who keep bringing these things up.

            Hope that helps. See ya on the way to the soup kitchen. . .

            "The law is meant to be my servant and not my master, still less my torturer and my murderer." -- James Baldwin. July 11, 1966.

            by YucatanMan on Thu Mar 14, 2013 at 10:28:44 PM PDT

            [ Parent ]

        •  Dburn, (2+ / 0-)
          Recommended by:
          happymisanthropy, Dburn

          How many ways can I thank you for writing these clear comments? I want to wallpaper my dining  room with your words.

          Would you mind sending your comments along to Elizabeth Warren or someone who might use them in a Senate hearing?

        •  You're making the same mistake as in the article (0+ / 0-)

          I think that you're right about the wisdom of prosecuting them; obviously, White agrees with you.  (Read what I quoted from her.)  Where there may -- repeat, may -- be a valid point is in the choice of remedies.  I don't know the current thinking on how letting Lehman Bros collapse may have contributed to economic disaster (and even if it did I don't know that we had much of a choice), but it wouldn't surprise me if a "death penalty" for large institutions could have major economic repercussions.  We don't have much good contemporary data on it because we don't do it.

          Plaintiffs' Employment Law Attorney (harassment, discrimination, retaliation, whistleblowing, wage & hour, &c.) in North Orange County, CA.

          "I love this goddamn country, and we're going to take it back."
          -- Saul Alinsky

          by Seneca Doane on Fri Mar 15, 2013 at 03:14:49 AM PDT

          [ Parent ]

          •  I made a comment earlier (0+ / 0-)

            about when we were prosecuting Individuals in firms. Lets use Bernie Ebbers at Worldcom as an example. Worldcom was a roll up that had been conveying fraudulent financial statements to the market about it's real condition. They also employed 10's of thousands but more importantly they had control of a good part of the Internet Backbone.

            No argument was ever made that going after world-com execs would cause economic harm. In fact, there was no economic harm at any time during the corporate scandals after 9/11.

            They basically prosecuted all the major execs and most of them are still in prison. Here is where I come down. We have heard people conflate the executive and the firms themselves as one. If we prosecute a CEO like Dimon the world would cease to exists as we know it.

             It almost seems like the Onion has invaded DailyKos because there were very intelligent people advancing that argument . I have no idea why, except I can only assume that they were either stupid, or they were knowingly protecting the executives (like employees) or were practicing personality politics. They are so in love with the politician, that they would advance any argument that would give that politician cover. Hell the politicians did it too. I regard Holder as a politician. He has absolutely nothing to do with the Rule of Law. He brings shame to this administration, to the dept of Justice and even the Manhattan office of the Unite States Attorney's office.

            A producer for the Untouchables series tried to get ahold of the USA from "The Office" and was directed to the DOJ. That suggest there was very little autonomy in the USA's offices also. That is reminiscent of an earlier administration.

            As far as taking apart the firms through prosecution: They would send a message that our institutions have to adhere to the rule of law. By allowing them to get away with murder we are saying that the US Govt explicitly endorse US firms cheating their international customers as well as domestic too. The Rule of Law  is the foundation for a free market capitalist system. There must be trust in order for investment on a large scale to occur. When trust is violated and the govt won't enforce the laws then we see the results first hand. An economy that only has a artificially stimulated stock market that is supposed to show recovery. The reality is we are a long way away from just getting back to when it was bad.

            As an Attorney, I would think you would know this and understand it. Instead of giving an argument like this:

            We don't have much good contemporary data on it because we don't do it.
            Isn't it true that precedents are set all the time in your world? There are risks to everything. Life is a risk. But the riskiest business of them all is taking apart institutions that were carefully put together for financial and political expediency.

            Lets not insult people by implying that we should only adhere to the rule of law when there is no economic repercussions. Once you have made that argument, you have opened the door to firms getting larger and larger.

            Finally, we have put a death sentence on a large accounting firm. Arthur Anderson. We also put 1000s of savings and loans out of business in 1990-91.
             Nothing happened on a macro basis when they went out of business.  So saying we have never "done it" is not true. No prosecutor should ever consider anything but the law especially when the behavior they are trying to stop caused massive economic hardship in the first place. Somehow, all of you who advance the "economic fall-out" argument seem to have  amnesia over 2008 and what has followed since.

            This is what happens when Banks run a muck. Allowing them to continue to do so only invites even worse  outcomes. To even imply  that the economy has been fixed because we didn't prosecute is total nonsense. We are so far away from it being fixed, that unless we do take action, this economy will continue to shift wealth to those who least deserve it at the expense of those who are honest.

             Risk will far outweigh reward which means the economy will never see the types of investments that were once made which means no  full recovery not to mention the fact that once these banks blow it up again, the US simply won't have the firepower to help get the economy up and running again.

            The cost of doing nothing now far exceeds that of taking aggressive action. We certainly have the prison capacity. To suggest that the rule of law be ignored as it is now should never cross the lips of someone who has studied the law and actively practices it.

            “ Success has a great tendency to conceal and throw a veil over the evil of men. ” — Demosthenes

            by Dburn on Fri Mar 15, 2013 at 05:50:56 PM PDT

            [ Parent ]

            •  You realize that the SEC does not do (0+ / 0-)

              criminal prosecutions, right?  I don't think that they have the capacity to "prosecute" Jamie Dimon.  I think -- could be wrong -- that that would be the DOJ, in which case your complaint is about AG Holder.  (And I agree with you.)

              You seem to think that Arthur Andersen was the same as a huge commercial bank.  It wasn't.  Breaking up an accounting firm means that the accounts (and the accountants -- and as I recall the executives too) are divided among other accounting firms.  As I recall, they did deserve it -- but it also reduced the size of the oligopoly that dominates the accounting industry, so it's certainly a mixed blessing.

              The rest of your post is both somewhat personally insulting and based on some misconceptions (some about me, some about law), so if it's all the same to you I won't address it.  Most of what you say about how we should not allow financials become too big to fail/jail is correct, as I had already noted, so on those points I agree with you.  That you're right about a diagnosis, though, does not make you right about a prescription.

              (The word, incidentally, is "amok.")

              Plaintiffs' Employment Law Attorney (harassment, discrimination, retaliation, whistleblowing, wage & hour, &c.) in North Orange County, CA.

              "I love this goddamn country, and we're going to take it back."
              -- Saul Alinsky

              by Seneca Doane on Fri Mar 15, 2013 at 09:14:00 PM PDT

              [ Parent ]

              •  Take a look at the Headline of your post to me (0+ / 0-)

                If you feel insulted, ask yourself how you would have responded to that.

                I have seen enough apologists for the banks over the last few years to last a lifetime. The fact you worked at the same firm Mary Jo White worked at doesn't make me feel like your capable of giving a neutral analysis of it.

                I have also found when people nit pick at words and then  refuse to respond, they have no argument. The "Trust us, the world will explode if a financial institution is taken down" doesn't have the travel distance it used to have . Absent an explanation of why a global collapse would happen,  if we took one down , the argument is starting  to fall on deaf ears.

                The idea that we would idly sit by and let laws be broken that have harmed millions  because it might have a economic impact, is unfathomable. Especially since the economic impact of letting them run amok is slowly causing Europe to crumble while here at home, the economic repercussions are still with us from 2008 despite what economists say.

                Other elements that apologists refuse to acknowledge is that a two tiered system of justice based on economic and political expediency has a trickle down effect that feeds on itself which subsequently converts an economy to a predator based system  that feeds off artificially induced failure makes the system only work for thieves and those that protect them.

                Attorneys are not economists. They have little training in that field. Academic Economists only go by theory and there are many different theories to go on yet they can't prove their theories until they are turned into policy.

                The fact that attorney sell their opinions for money , along with junk economists who can expertly weave bullshit to bring about false conclusions that are mindlessly parroted by just about everyone makes this whole world destruction meme sound more ridiculous every day.

                Just think, you are one of them and let that simmer for awhile.

                “ Success has a great tendency to conceal and throw a veil over the evil of men. ” — Demosthenes

                by Dburn on Sat Mar 16, 2013 at 10:25:36 AM PDT

                [ Parent ]

              •  The SEC doesn't do prosecutions (0+ / 0-)

                I'm sorry, where in the world did you get that idea that I thought that the SEC could do prosecutions? They can refer cases to the Justice department. All they can do is sue for civil remedies. I've known that since Civics 101.

                Of course I know the difference between an accounting firm with offices all over the world and a BHC. That doesn't stop people who  conflate the Anderson Death Sentence with a Bank prosecution in order  to discourage prosecution. "All those jobs lost". "The sentence was reversed"

                 You seem to think that prosecuting a Bank would mean a death sentence which I have never agreed with. If a case for financial ruin could be made so that putting a bank into receivership would be too risky, I assume we would hear the reasons why. Not only hasn't that happened , but we also are told that prosecuting any of the Banks Officers would have the same effect. That is total nonsense.  Unfortunately there are many Americans that have bought into that bullshit.

                You seem unable to come up with a clear and convincing line of fact based reasoning why the worst would happen if we had a DOJ  that would do it's job.  I would have thought you would have is down pat. Instead , you attacked me in the first reply and the second reply with not much else but air. Then complain that I was insulting you when I responded to the first.

                "Take my word for it" just isn't good enough. If anything good comes out of this, Bank apologists would be the first to go.

                “ Success has a great tendency to conceal and throw a veil over the evil of men. ” — Demosthenes

                by Dburn on Sat Mar 16, 2013 at 10:43:33 AM PDT

                [ Parent ]

                •  Right -- they don't do criminal prosecutions (0+ / 0-)

                  They refer criminal cases elsewhere.

                  Tired of your shit, so leaving.

                  Plaintiffs' Employment Law Attorney (harassment, discrimination, retaliation, whistleblowing, wage & hour, &c.) in North Orange County, CA.

                  "I love this goddamn country, and we're going to take it back."
                  -- Saul Alinsky

                  by Seneca Doane on Tue Mar 19, 2013 at 09:07:10 PM PDT

                  [ Parent ]

      •  decisions, decisions (1+ / 0-)
        Recommended by:
        Seneca Doane

        Bear in mind that the "decision to prosecute" has a civil variety (SEC) and a criminal one (DOJ).

        I believe White was making the decision-to-prosecute-versus-remedy distinction on the civil side only.

        •  Yes, I presume so as well (0+ / 0-)

          I don't think that that changes my analysis anywhere.  If so, I miswrote.

          Plaintiffs' Employment Law Attorney (harassment, discrimination, retaliation, whistleblowing, wage & hour, &c.) in North Orange County, CA.

          "I love this goddamn country, and we're going to take it back."
          -- Saul Alinsky

          by Seneca Doane on Fri Mar 15, 2013 at 02:39:48 PM PDT

          [ Parent ]

      •  Don't apologise, very well put. n/t (1+ / 0-)
        Recommended by:
        Seneca Doane

        Information is abundant, wisdom is scarce. ~The Druid.
        ~Ideals aren't goals, they're navigation aids.~

        by FarWestGirl on Fri Mar 15, 2013 at 02:30:47 PM PDT

        [ Parent ]

    •  Explains a lot. Doesn't it? (3+ / 0-)
      Recommended by:
      elwior, chuckvw, happymisanthropy

      That and the fact that there are plenty of people who would condone it.

      One of the major differences between Democrats and Republicans is that the former have the moral imagination to see the moral dimension of financial affairs, while the latter do not. Some pragmatists are exceptions.

      by Words In Action on Thu Mar 14, 2013 at 01:42:44 PM PDT

      [ Parent ]

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