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Columns

August 17, 2013

So how's that crackdown on Wall St. going?

The Justice Department admitted last week that it lied about the success of a year-long nationwide probe into mortgage fraud. Oh, and by the way, the lie was told a month before last fall’s presidential election.

The results were announced at an Oct. 9 news conference by Attorney General Eric Holder, who called the probe a “historic, government-wide commitment to eradicating mortgage fraud.”

The “Distressed Homeowner Initiative,” Holder claimed, netted criminal charges against 530 people who ripped off some 73,000 victims to the tune of $1 billion. But when Bloomberg News’ Phil Mattingly and Tom Schoenberg took a quick glance at some of the defendants listed, they smelled a rat.

One such defendant, Chicago lawyer Norton Helton, was charged in October 2006 — when George W. Bush was in office. Out of 10 other defendants touted by the Justice Department in publicizing the probe, Bloomberg found that six were indicted in 2009 and 2010 —more than a year before the “Distressed Homeowner Initiative” even began.

Holder’s shell game was noticed and criticized within hours, but it took weeks for his department to respond to the criticism, then months to admit it had lied. When Bloomberg’s Jonathan Weil immediately asked the Justice Department for a complete list of the defendants, a spokesman told Weil “we’ll have a list to you” — then ignored him, and pulled the same dodge when he asked again Oct. 19, Oct. 26, Nov. 5 and Nov. 13.

Finally, the FBI this month corrected its numbers, saying the number of people charged in the probe was actually 107, there were only 17,185 victims and their losses were actually just $95 million.

Weil had reason to doubt Holder. In 2010, the Justice Department’s Financial Fraud Task Force attempted a similar ruse after “Operation Broken Trust” — a title that would surely make Orwell chuckle. In addition to people who were charged before the probe began, Weil noticed that the task force’s haul was mostly a hodgepodge of obscure, small-time swindlers who had nothing to do with the large-scale securities fraud that wrecked the economy in 2008.

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