Friday, January 7, 2011

Bill Black Sounds The Toscin: Whatever Happened To Prosecuting Real Fraud?

Okay, let me take off my white collar defense attorney hat and put on my former prosecutor hat for a minute. Call it my citizenship hat. Don't most of us want real, unadulterated big-time crooks to be investigated and, where appropriate, charged? Where are all the investigations and prosecutions of the accounting control fraud that caused one of the greatest recessions in U.S. history? You know, the current recession. 

Back in the late 1980s, when the S&L Crisis hit and the Dallas-based S&L Task Force was formed, federal law enforcement officials quickly realized that, in many instances, colossal fraud had been committed by the very players who controlled the S&Ls. The S&L fraud was overwhelmingly based on sham transactions and sham accounting for those transactions. Massive resources were committed to investigating and prosecuting the S&L fraud. It was understood that the crooked players had hijacked their S&Ls and defrauded depositors and/or the FSLIC. This rather elementary distinction between the savings and loan as an institution and the fraudsters who controlled it was grasped by AUSAs and effectively conveyed to juries across the land.

Nothing like this is happening today with respect to the federal government’s investigation of the housing bubble, liars’ loans, and Wall Street's subprime lending scandal. The overwhelming number of investigations and prosecutions seem to be focused on piker fraudsters—corrupt individual borrowers or mortgage brokers. These cases are easy pickings, but do not get to the massive fraud that clearly permeated the entire financial system.

Professor William Black, of Keating Five fame, has written a scathing piece all about this for the Huffington Post. Here it is. Among Black's revelations? "During the current crisis the OCC and the OTS - combined - made zero criminal referrals." Astounding. These two agencies accounted for thousands of criminal referrals per year during the S&L Task Force years. More fundamentally, Black argues that today's federal prosecutorial authorities do not comprehend that individuals in control of an institution can have an incentive to engage in short-term fraud that enriches them individually while destroying the long-term prospects of the institution and the larger economy.

Nobody should be charged with a white collar crime unless the crime is serious and the prosecution believes in good faith that a jury will find guilt beyond a reasonable doubt. But how about a substantive investigative effort, including commitment of appropriate resources? Why are such huge resources being spent on dubious endeavors like insider trading and FCPA enforcement, while elite financial control fraud goes largely unaddressed? Professor Black's piece is highly recommended reading.

(wisenberg)

January 7, 2011 in Current Affairs, FCPA, Fraud, Insider Trading, Investigations, Mortgage Fraud, Prosecutions, Prosecutors, Scholarship, Securities | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 4, 2011

In the News & Around the Blogosphere

Monday, January 3, 2011

James Cole Sworn in as New Deputy AG

The DOJ Press Release Reports -

Cole first joined the department in 1979 as part of Attorney General’s Honors Program and served there for 13 years – first as a trial attorney in the Criminal Division, and later as the Deputy Chief of the Division's Public Integrity Section, the office that handles investigation and prosecution of corruption cases against both Democratic and Republican elected and appointed officials at all levels of government.

He entered private practice in 1992 and has been a partner with Bryan Cave LLP since 1995, specializing in white collar defense. He served as a court-appointed independent monitor to businesses to establish and oversee corporate compliance programs and ensure they adhere to laws and regulations. He also counseled businesses on securities, regulatory, and criminal law issues.

While in private practice in 1995, Cole was tapped to serve as Special Counsel to the U.S. House of Representatives Committee on Standards of Official Conduct. In that role, he led an investigation into allegations that former House Speaker Newt Gingrich had improperly used tax-exempt money for partisan purposes and misled the Committee in its inquiry. His investigation led to a bipartisan resolution that was approved by an overwhelming majority of the full House, and required Speaker Gingrich to pay penalties.

In 2005, Cole was appointed to serve as an independent monitor at the insurance company AIG to review five years of transactions following a settlement with regulators involving allegations the company was setting up sham transactions to hide losses. His role there led to another appointment involving AIG in 2006, in which he was charged with developing financial reporting and regulatory compliance programs.

Cole has been a member of the adjunct faculty at Georgetown University Law Center, teaching courses on public corruption law and legal ethics, and has lectured at Harvard University’s Kennedy School of Government.  He is a former chair of the American Bar Association (ABA) White Collar Crime Committee and serves as the First Vice-Chair of the ABA Criminal Justice Section. 

He received his B.A. from the University of Colorado and his J.D. from the University of California-Hastings.

(esp)

January 3, 2011 in Prosecutors | Permalink | Comments (0) | TrackBack (0)