Author Topic: A Loan Fraud War That’s Short on Combat  (Read 212 times)

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Offline happyg

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A Loan Fraud War That’s Short on Combat
« on: March 16, 2014, 08:28:28 PM »
In the years since the financial crisis of 2008, the Justice Department has been regularly questioned about a lack of criminal prosecutions related to the mortgage mess.

Its responses have just about always been the same, whether in public speeches by Eric H. Holder Jr., the attorney general, or in interviews with Lanny A. Breuer, its former criminal division chief. Believe us, they would say, we’ve been working overtime on these matters; if there had been cases to make, we would have made them.

Mr. Breuer was especially vocal with these talking points. But last week, a report from the inspector general of the Justice Department, Michael E. Horowitz, set the record straight. Sure enough, the report told us how hard the nation’s law enforcement officials had been investigating these cases. That is, hardly at all.

The report, called “Audit of the Department of Justice’s Efforts to Address Mortgage Fraud,” covers the period from 2009 to 2011. It vindicates anyone who ever questioned the government’s claim that the reason there weren’t more mortgage-related fraud cases is because the cases just weren’t there to be made.

Most of all, the report is depressing because it indicates that the Justice Department, our nation’s top law enforcement agency, is simply unequipped — or unwilling — to combat complex financial frauds.

Here is one of the report’s conclusions: “We found that, despite public statements by the Financial Fraud Enforcement Task Force and the department about the importance of pursuing financial fraud cases, including mortgage fraud, the F.B.I. Criminal Investigative Division ranked complex financial crimes as the lowest of the six ranked criminal threats within its area of responsibility, and ranked mortgage fraud as the lowest subcategory threat within the complex financial crimes category. Additionally, we found mortgage fraud to be a low priority, or not listed as a priority, for F.B.I. field offices in the locations we visited, including Baltimore, Los Angeles, Miami, and New York.”

Got that? Complex financial crimes were the lowest priority for the criminal investigative division.

Even when investigators decided to pursue cases, they wound up closing many of them after doing little work. In fiscal 2011, for example, F.B.I. field offices closed 747 mortgage fraud cases without prosecution, the report found. Most were shuttered “with minimal or no investigation conducted.”

Here’s another troubling data point: While the Justice Department assigned staffers to become mortgage fraud coordinators, these people were not dedicated solely to mortgage cases. They had to work on other matters as well.

Ellen Canale, a Justice Department spokeswoman, contended that the report actually showed the mortgage fraud task force to have been a success.

“In the time period in question, the number of mortgage fraud indictments nearly doubled, and the number of convictions rose by more than 100 percent,” she said in a statement. “As the report itself notes, even at a time of constrained budget resources, the department has dedicated significant manpower and funding to combating mortgage fraud.”

Ms. Canale declined, however, to comment on the report’s description of how the Justice Department hyped claims of success by its task force in October 2012. In a news conference, Mr. Holder trumpeted the results of “a groundbreaking, yearlong mortgage fraud enforcement effort — the first ever to focus exclusively on crimes targeting homeowners.” (Remember, the administration was desperate to convince people that it was helping troubled borrowers, not just big banks.)

Calling this program “a model success,” Mr. Holder went on to claim that 530 criminal defendants had been charged, including 172 executives, in the previous 12 months. The cases involved more than 73,000 victims and losses of more than $1 billion, he said.

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