By Justin Vernold
The Daily Star
---- — 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.
In one case, Princeton Review was charged for claiming bogus reimbursements for a federal low-income education program. In another, three Connecticut women in their 50s and 60s were charged in a “gifting tables” pyramid scheme, for which they were ordered to pay $32,000 restitution. Apparently this is what Holder had in mind when he said he’d “hold accountable those who helped bring about the last financial meltdown.”
To this day, no executive from any of the major banks responsible for widespread mortgage fraud has been charged by Holder’s Justice Department, even though there’s plenty of proof these banks knowingly misled clients about the quality of mortgage-backed securities. And with a recent Supreme Court ruling (Gabelli v. Securities and Exchange Commission) upholding the five-year statute of limitations in securities fraud cases, Holder’s inaction means most of the crooks responsible for the 2008 meltdown are now in the clear.
But Holder’s lenient attitude toward “too big to fail” banks shouldn’t as a surprise. Reuters in 2012 reported that Holder’s old Washington law firm, Covington & Burling, “represented a Who’s Who of big banks and other companies at the center of alleged foreclosure fraud” — including Bank of America, Citigroup, JP Morgan Chase and Wells Fargo.
Holder isn’t the only Justice Department bigwig with ties to Covington & Burling, according to a report from Peter Schweizer, best known for his best-selling book “Throw Them All Out.” Lanny Breuer was a white-collar defense lawyer at Covington & Burling before President Barack Obama picked him to lead the Justice Department’s Criminal Division in 2009. This year, Breuer left the Justice Department and returned to the firm. Colleagues Steve Fagell and James Garland made the same round trip from Covington & Burling to the Justice Department and back.
In fact, Holder and Breuer have a long history of fealty toward “too big to fail” banks. In a 1999 memo from his time as Deputy Attorney General, Holder wrote that prosecutors should “consider the collateral consequences of a corporate criminal conviction in determining whether to charge the corporation with a criminal offense.” In an 2012 speech to the New York Bar Association, Breuer said his fears of the ripple effect of prosecuting criminals at the nation’s largest banks “literally keep me up at night.”
It wasn’t always this way. In the aftermath of the savings and loan meltdown of the late 1980s, the Justice Department convicted more than 1,000 bankers. Charles Keating Jr. of Lincoln Savings and Loan and David Paul of Centrust Bank, whose crimes cost taxpayers a combined $5.1 billion, were both sent to prison.
Holder hasn’t even tried to seek similar justice against those responsible for the 2008 meltdown. But we probably should have seen this coming when Obama appointed a team of foxes to guard the henhouse.
JUSTIN VERNOLD is a copy editor at The Daily Star. Contact him at firstname.lastname@example.org.