Newsweek and Wall Street Journal report on few convictions and scant official data.
The Justice Department has been pressured for much of President Obama’s tenure to more aggressively prosecute Wall Street executives for crimes that helped create the 2008 financial crisis. So after two major publications in May unveiled findings of historically low numbers of prosecutions in the field as well as an absence of official data, the department on Monday defended itself.
In a May 6 article for Newsweek/The Daily Beast, authors Peter J. Boyer and Peter Schweizer reported that federal financial fraud prosecutions are at 20-year lows, according to data from the Transactional Records Access Clearinghouse at Syracuse University. They said the task force for investigating risky mortgage lenders that Obama highlighted during his January State of the Union address, “is badly understaffed and has yet to produce any discernible progress.”
On Monday, The Wall Street Journal reported that Justice, in a March exchange of letters with Sen. Chuck Grassley, R-Iowa, said it had not kept data on the number of executives convicted of criminal misconduct during the meltdown that preceded Obama’s inauguration. The absence of data is of concern to many legal analysts.
Grassley said the department’s response “substantiates my suspicion” that it “isn’t going after the big banks, big financial institutions or their executives” and instead is “hiding behind a bunch of mortgage fraud prosecutions.”
Allison Price, a Justice spokeswoman, on Monday emailed Government Executive to say that the department “has and will continue to aggressively investigate financial fraud wherever it occurs. When we find sufficient evidence of criminal conduct we will not hesitate to bring charges.”
Since fiscal 2009, Justice has seen a 92 percent increase in mortgage fraud cases, she said. In fiscal 2010 and 2011, it charged more than 2,100 defendants nationwide with mortgage fraud-related crimes. And since fiscal 2009, “all financial fraud cases, including securities fraud, corporate fraud, investment fraud and commodities fraud, increased by 12.5 percent,” Price said.
Work on the special financial crimes unit continues apace, she said. “Moving forward, in order to strengthen our efforts at combating fraud, in fiscal 2013, the department proposed a $55 million initiative for financial and mortgage fraud enforcement efforts. This increase will support additional FBI agents, criminal prosecutors, civil litigators, in-house investigators, forensic accountants, paralegals and other support positions to ultimately strengthen the department’s ongoing efforts to investigate and prosecute allegations of financial fraud.”