FRIDAY, JUNE 18, 2010
KLMNO POLITICS THE NATION &
Wall Street cases lag despite anti-fraud effort
BIG BANKS FACE NO CHARGES
Holder stresses ‘totality’ of task force’s goals
by Jerry Markon
Since taking office at the height of the financial crisis, President Obama has promised to hold Wall Street accountable for the melt- down. Attorney General Eric H. Holder Jr. reinforced that mes- sage in November when he vowed to prosecute Wall Street exec- utives and others responsible for the crisis. “We will be relentless in our in-
vestigation of corporate and fi- nancial wrongdoing, and we will not hesitate to bring charges,” Holder said as he launched a fi- nancial fraud task force. His Justice Department took steps to fulfill that promise this week when it arrested the former chairman of one of the nation’s biggest mortgage firms — the largest crisis-related criminal case — and announced that 1,215 people have been charged with mortgage fraud since March 1. But that success masks the gov- ernment’s difficulties in the high- est-profile investigations: those of Wall Street banks. Nearly 11
⁄2 years into Obama’s
tenure, despite several cases against mortgage companies whose lending practices contrib- uted to the crisis, the administra- tion has not brought any charges against the big Wall Street banks that took those loans, converted them into toxic securities and pumped them into the world’s fi- nancial markets. Law enforce- ment sources say no such charges are imminent. The blunt words of administra-
tion officials have triggered de- bate over whether they have gone too far in appearing to promise difficult cases that critics say might never be filed, in part be- cause they would essentially criminalize an entire business model in the financial industry. “The attorney general got out ahead of the facts and the evi- dence in saying, ‘We’re going to go down to Wall Street with a pitch- fork and roust those fat cats out of their offices and put them in jail,’ ” said Tim Coleman, who prosecuted major fraud cases be- fore leaving the Justice Depart- ment five years ago. “This was a case, in general, of people making business judgments and taking risks and having them go badly. That’s not criminal misconduct.” A law enforcement official agreed. “I’m not big on using such
strong language before your cases are ready,” said the official, who spoke on the condition of ano- nymity to discuss internal delib- erations. Referring to a key Wall Street filed during the Bush ad- ministration against two former Bear Stearns executives — a case lost last year — the official added: “Look what happened with Bear Stearns.” Justice officials say that Holder did not over-promise and that the task force is targeting all financial fraud, not just on Wall Street. At a news conference Thursday, Hold- er said the efforts should not be evaluated only in terms of Wall Street cases: “You have to look at the totality of what this task force was supposed to do.” James M. Cole, Obama’s nomi- nee for deputy attorney general, reinforced the message during his Senate confirmation hearing Tuesday. “We need to hold people accountable” for the financial cri- sis, he told the committee. “One of the main ways to do this is to go after the individual executives who are responsible. It is they who will go to jail, they who will suffer the consequences.”
The Justice Department is pouring resources into financial fraud, including 48 FBI investiga- tions of businesses and financial institutions involved in the crisis. Officials say more indictments will come and point to major fraud cases in recent months, in- cluding Ponzi schemes, mortgage frauds and the largest insider- trading case in a generation. But investigators are encoun- tering obstacles in what they call their top-priority cases, which sources said include probes of J.P. Morgan Chase, Citigroup and oth- er household names. “Not every case can be brought,
and it’s very easy for people to want to see heads roll and some- times understandable when they do. But it’s not possible to roll the head if you don’t have the evi- dence,” said Preet Bharara, the U.S. attorney in Manhattan, who sources said is overseeing some of the highest-priority investiga- tions. He added: “We have never been working harder, have never put so many resources into inves- tigating and prosecuting corpo- rate fraud in this office. . . . If there is anything to get to the bot- tom of, we will.” Kevin L. Perkins, assistant di-
rector for the FBI’s Criminal In- vestigative Division, said Wall Street and other corporate in- vestigations involve “very highly paid, educated and sophisticated” targets who argue that they warned investors of potential risks. Prosecutors must prove a deliberate intent to defraud. “Is that a valid defense that
makes it hard? From a criminal standpoint, it is, yes,” Perkins said. The political imperative to bring cases shows no sign of weakening, with the administra- tion pushing for financial reform legislation and key senators call- ing for prosecutions. The administration has also
raised expectations. The Justice Department, which secured a 12 percent budget increase to fight financial fraud this year, is re- questing 23 percent more in 2011. Neil H. MacBride, the U.S. attor- ney in Alexandria, recently an- nounced a Virginia financial fraud task force.
KATHY WILLENS/ASSOCIATED PRESS
When Holder unveiled the broader task force with some fan- fare in November, he embraced the administration’s message that “Wall Street does not play by the same rules as Main Street.” In his prepared remarks, still posted on the Justice Department’s Web site, he warned “unscrupulous ex- ecutives” and others that “we will investigate you, we will prosecute you, and we will incarcerate you.” The task force is run by Exec- utive Director Robb C. Adkins, 39, a former Enron prosecutor who was chief of the U.S. attorney’s of- fice in Orange County, Calif. Ad- kins works out of the fourth floor of department headquarters. The administration calls the panel the broadest government coalition ever assembled to com- bat fraud. More than 20 agencies, from the Securities and Exchange Commission to the Treasury De- partment’s Financial Crimes En- forcement Network, share infor- mation and coordinate cases. The task force also aims to help
fraud victims. It has hosted mort- gage-fraud “summits” and the Web site,
www.stopfraud.gov, allows the public to report fraud. The administration has brought major cases, including Tuesday’s arrest of Lee Bentley Farkas, who led Florida-based Taylor, Bean & Whitaker. He is charged in federal court in Alex- andria in a $1.9 billion fraud scheme that led to the failure of a large regional bank. But in two Wall Street cases,
both filed in the Bush administra- tion, the record is mixed. Obama Justice Department prosecutors convicted two former Credit Suisse brokers in a $1 billion sub- prime mortgage fraud, but the two former Bear Stearns exec- utives accused of lying to inves- tors were acquitted.
Among the companies under
investigation, law enforcement sources said, are Deutsche Bank, UBS, Goldman Sachs, Morgan Stanley and the former Lehman Brothers.
markonj@washpost.com
Reid Stowe sails into New York Harbor aboard his 70-foot schooner Anne after spending 1,152 consecutive days at sea. Stowe had missed the birth of his son while making the trip.
N.Y. man returns from three years at sea: A New York man is back on dry land after more than three years at sea. Reid Stowe, 58, docked his schooner about 1:20 p.m. Thursday in Manhattan, touching land for the first time since April 2007. When he got on- to the dock, Stowe immediately kissed his girlfriend, Soanya Ah- mad, 26, who had begun the trip with him but left when she be- came pregnant, and their son, Darshen, 23 months.
DIGEST
S
A3
UTAH
Stay denied, inmate faces firing squad
Utah was set to execute a con- demned killer by firing squad Fri- day morning, reviving an Old West style of justice that has not been used for at least 14 years. Barring the success of any final appeals, Ronnie Lee Gardner will be strapped into a chair, a target pinned over his heart. Then marksmen armed with .30-cali- ber rifles will execute him. The 10th U.S. Circuit Court of Appeals in Denver denied Gard- ner’s petition for a stay Thursday. An appeal is pending before the U.S. Supreme Court, and Gardner also has asked Gov. Gary R. Her- bert (R) for a temporary stay. Gardner would become the third man killed by firing squad in the United States since a Su- preme Court ruling reinstated capital punishment in 1976. Al- though Utah altered its capital punishment law in 2004 to make lethal injection the default meth- od, nine inmates convicted be- fore that date, including Gardner, can still choose the firing squad. Gardner, 49, was sentenced to
death for a 1985 capital murder conviction stemming from the fa-
tal courthouse shooting of attor- ney Michael Burdell during an escape attempt.
—Associated Press NEW YORK
East Side, West Side, there will be a piano
Anyone who gets a sudden itch to tickle the ivories will be able to play free public pianos in 50 places throughout New York, from the Coney Island boardwalk to the Metropolitan Museum. An art installation touring the world is making its first U.S. stop Monday. For two weeks, players can play tunes on pianos all over the city,at such landmarks as the Lincoln Center, the foot of the Brooklyn Bridge, the Staten Is- land ferry terminal and Central Park’s band shell.
Each of the 60 pianos to be in- stalled throughout New York has attendants responsible for its care. That involves unlocking the keyboard at 9 a.m. every day and deploying a heavy tarp over the instrument if it rains. The pianos were donated for the cause and have been painted and decorated by artists. They will be delivered to 27 lo- cations in Manhattan, 10 in
Brooklyn, five in Queens, and four each in Staten Island and the Bronx.
—Associated Press
At least 5 dead in N.M. plane crash: At least five people were killed and two were injured when a twin-engine plane overshot a runway while landing and crashed Thursday at a regional airport in south-central New Mexico, federal and local au- thorities said. Authorities said it was too early to tell what caused the crash at Sierra Blanca Re- gional Airport, just outside the mountain community of Ruido- so.
S.C. Democrats rejects new pri- mary election: Members of the South Carolina Democratic Par- ty’s executive committee voted Thursday night against holding a new Senate primary, upholding last week’s controversial win by unemployed veteran Alvin Greene over former state repre- sentative Vic Rawl. Rawl brought his case before the committee af- ter losing to Greene 59 percent to 41 percent, but the 61 members present rejected his protest by a 5 to 1 margin. —From Staff Reports and News Services
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