But even if the SEC or state attorneys general exact some kind of fine, the restitution probably won't come from the culprits. Henry Blodget, Merrill Lynch's biggest dot-com booster and a central subject of the Spitzer investigation, reportedly earned more than $10 million a year during the '90s Internet boom. But in all likelihood he'll get to keep most of his earnings.

"It's going to be very hard to go after Blodget," says law professor Cox. "It's like playing Old Maid, the card game, where you pass off the card you don't want. Here, the costs will be passed off to an insurance policy or the firm itself."

Spitzer's office insists that it's still considering a financial penalty that would be paid by analysts. "We have not ruled out criminal or civil penalties at this point," says Juanita Scarlett, a spokeswoman. "We are addressing the issue of a fine."

And some argue that if Spitzer actually fights for a fine, he has a good chance of winning. The e-mails could tip the scales; this is the best chance in years of hanging Wall Street crooks out to dry, says Greenberger, who served at the CFTC in the late '90s.

"Normally a case against an analyst or law firm is extremely hard to bring, but the facts that have been outlined here by these e-mails really put the plaintiff and the government in a much stronger position to go after them," he says. "The evidence is so dramatic. The analysts really have to defend themselves from the charge of being primary actors in the fraud."

To the skeptics who say it will never happen, Greenberger says, "Look what's happened so far. Eight weeks ago, everyone said they'd never get enough evidence to go after the analysts. But now they have it."

Still, the hurdles look overwhelming. The analysts and their firms can easily push the burden of responsibility back to investors like Sunil, who admits that he should have been smarter with his parents' money. Wall Street and its defenders are already trotting out this line of thinking.

"People need to understand the business of an investment bank," says Adam Pritchard, a research fellow at the Cato Institute and a law professor at the University of Michigan. "If Blodget knew enough about a particularly good company, why would he share it with you? The idea that the analyst is going to provide you with some inside scoop is something that you can believe only if you've been blinded by greed."

Not even Spitzer's office is dead set on criminal prosecution. "We're insisting that the company admit wrongdoing, and that would open up the door for civil actions," says Scarlett, when pressed about Spitzer's strategy. "It's been our experience that the best way to get restitution is through these private class-action lawsuits."

But class-action lawyers aren't interested in going after individuals. They have their sights set on bigger game: huge cash settlements from the deepest pockets they can find.

Their motivation is understandable, another product of how the system is wired. Class-action lawyers front the cost of litigation and earn back up to a third of whatever is gained. Thus they have no incentive to get the money from the officers, who may have hidden their assets in offshore accounts or spent the money they earned illegally. They want the corporation as a whole to pay the price.

To many, this makes little sense: "The real problem with class actions is that they sanction the wrong entity," Pritchard says. "They sanction the corporation, not the people in charge."

Settlements also tend to please judges, who want to clear their dockets, and defendants, who prefer to hold their assets while hiding behind the corporate veil.

"There's a famous quote from a federal district court judge that sums up the conventional wisdom," says Cox: "A bad settlement is much better than a good trial."

And why not, say class-action lawyers. Settlements benefit investors. "The reality is that you're charged with recovering money," says Darren Robbins, a partner at Milberg Weiss, the nation's largest class-action firm. "You're not charged with putting people in jail. You have a job to recover damages."

But the so-called deep-pockets theory of justice has proved costly in at least one critical domain: deterrence. Experts argue that those who defend the system of class-action settlements are essentially encouraging fraud. When only corporations pay, often with large insurance policies, there's no incentive to obey the law, says Cole, the "Pied Pipers" author.

"The more you make it look like a cost of business, the more it just appears in an insurance policy," he says.

This is how the present system works. These days, "the crooks have a good idea that they have a high likelihood of getting away with fraud," Pontell says. And so the crimes continue.

"If we decided to go after the people, they would have a much larger incentive not to cheat," Pritchard says.

And if the analysts and their ilk continue to get off scot-free, investors will remain angry and skittish.

Ultimately, Sunil says, "something has to happen. This can't go on."

Recent Stories