Why No Financial Crisis Prosecutions? Ex-Justice Official Says it’s Just too Hard

Why No Financial Crisis Prosecutions? Ex-Justice Official Says it’s Just too Hard

by Marian Wang ProPublica

It’s an issue we and others have noted again and again: Years after the financial crisis, there have still been no prosecutions of top executives at the major players in the financial crisis.

Why’s that? Well, according to a now-departed Justice Department official who used to be in charge of investigating such matters, the Justice Department has decided that holding top Wall Street executives criminally accountable is too difficult a task.

David Cardona, who recently left the FBI for a job at the Securities and Exchange Commission, told the Wall Street Journal that bringing financial wrongdoing to account is “better left to regulators,” who can bring civil cases. Civil cases, of course, can produce penalties from the banks — as well as promises to be on better behavior — but don’t put any executives behind bars. Here’s the Journal:

While at the FBI, Mr. Cardona oversaw dozens of criminal probes of large financial firms. The FBI’s probes haven’t led to any successful prosecutions of high-profile executives in relation to the financial crisis, despite demands from some lawmakers and angry Americans. In contrast, the SEC has filed crisis-related civil-fraud cases against 81 firms and individuals, and it has negotiated almost $2 billion in penalties in cases that have been settled.

Cardona told the Journal that the failed first attempt to charge financial players with crisis-related fraud — the 2009 trial and eventual acquittal of two Bear Stearns Cos. hedge-fund managers — triggered “a lot of rethinking on how we do things.” After that, he said, the federal government began to question its “ability to convince a jury that criminality has occurred” on complex and technical financial cases.

The lack of prosecutions was also raised in a ‘60 Minutes’ piece Sunday about large-scale mortgage fraud during the bubble. Assistant Attorney General Lanny Breuer told CBS that the Justice Department had not lost confidence and was “bringing every case that we believe can be made.”

“I get it. I find the excessive risk taking to be offensive,” said Breuer. “I may personally share the same frustration that American people all over the country are feeling, that in and of itself doesn’t mean we bring a criminal case.”

However, one question raised by the 60 Minutes segment is why the Justice Department isn’t building criminal cases against companies for violating Sarbanes-Oxley — a landmark corporate reform law enacted after Enron. From the transcript:

The Sarbanes Oxley Act imposed strict rules for corporate governance, requiring chief executive officers and chief financial officers to certify under oath that their financial statements are accurate and that they have established an effective set of internal controls to insure that all relevant information reaches investors. Knowingly signing a false statement is a criminal offense punishable with up to five years in prison.

Frank Partnoy is a highly regarded securities lawyer, a professor at the University of San Diego Law School and an expert on Sarbanes Oxley.

Frank Partnoy: The idea was to have a criminal statute in place that would make CEOs and CFOs think twice, think three times before they signed their names attesting to the accuracy of financial statements or the viability of internal controls.

Kroft: And this law has not been used at all in the financial crisis.

Partnoy: It hasn’t been used to go after Wall Street. It hasn’t been used for these kinds of cases at all.

Kroft: Why not?

Partnoy: I don’t know.

As Cardona — the former Justice official — sees it, financial regulators have been doing a “fine job” building civil cases against big firms.

That might come as a surprise to U.S. District Judge Jed Rakoff, who’s repeatedly rebuked the SEC for striking relatively small agreements to settle civil charges against financial firms.

As we noted last week, Rakoff tore into a recent $285 million settlement with Citigroup, calling the financial penalty “pocket change” for Citi and blasting the SEC’s longstanding practice of allowing firms to settle without admitting wrongdoing.

Comments
22 Responses to “Why No Financial Crisis Prosecutions? Ex-Justice Official Says it’s Just too Hard”
  1. TxRancher says:

    Maybe it’s time for the “street” to enforce “justice”. Publish the names & addresses of these men/women that risk our financial future to satisfy their lust for wealth. If the laws & courts won’t provide justice, the people will take the law into their own hands. Our legislators & prosecutors better start doing their jobs or angry mobs will.

    • lvent says:

      Here is proof the fraud is massive and pervasive:
      http://securities.stanford.edu/
      and the top ten list of settlements:
      http://securities.stanford.edu/top_ten_list.html

      • lvent says:

        Here is some of the dirt on Cendant Corp….who is now PHH MORTGAGE…That is what they do, they re-emerge as new entities…and are still committing massive fraud!
        http://securities.stanford.edu/1002/CD98/index.html

      • lvent says:

        Here is a study on how the Courts and the Government have turned Federal Crimes into monetary fines for these criminals for the benefit of their “INVESTORS”..IT IS A CROCK!!! If this was not a massive cover up then the investors and their attorneys would demand criminal prosecutions…..they are all covering up for what amounts to RACKETEERING……the investors are guilty for not doing their own due dilligence…and then when the BET CRAPS OUT, THEY SUE?????…there are 37,000 complaints,briefs and filings…THIS IS A RACKET…..WHY? BECAUSE THERE HAVE BEEN NO CRIMINAL PROSECUTIONS OF ANY OF THE BIG FISH….and THE INVESTORS KEEP COMING BACK FOR MORE!!!! THEY ARE ROBBING THE U.S. TAXPAYER BLIND AND EXRACTING ALL OF THE WEALTH OUT OF THE U.S. TAXPAYERS….!!
        http://securities.stanford.edu/research/studies/20001116_SSRN_Bajaj.pdf

      • lvent says:

        THE GOVERNMENT HAS TURNED CRIMINAL ACTS INTO VIOLATIONS AND THEY ARE ALL GETTING RICH OFF OF IT…WALL STREET….AND THEIR INVESTORS..INCLUDING THE POLITICIANS..IT IS ALL A SHAM AND A FRAUD….WALL STREET CALLS IT THE COST OF DOING BUSINESS AND THEY AND THE INVESTORS ARE GETTING RICH OFF OF IT…….!!! THROW THESE CROOKS IN PRISON!!!!

      • lvent says:

        STOP THE FINES…AND THROW THE CROOKS IN PRISON…THE AMERICAN PEOPLE ARE SICK AND TIRED OF PAYING FOR ALL OF THEIR FRAUD…!!!! THEY ROB US OF TRILLIONS…AND GET SLAP ON THE WRIST FINES THAT MONEY GETS HANDED TO THEIR CRIMINAL INVESTOR FRIENDS AND THE POLITICIANS……!!!! WHERE IS THE MONEY THAT MASS AG RECOVERED FOR THE STATE OF MASS..????? YOU PEOPLE WILL NEVER SEE IT….!! FINES ARE A SHAM AND A FRAUD!!! THEY ARE ROBBING THE AMERICAN PEOPLE..THAT IS WHAT THEY ARE DOING…!!!

  2. lvent says:

    LIARS!!! The Ill AG’s office told me last year that intent to do permanent harm is really hard to prove…REALLY? 47% OF PEOPLE CAN’T PAY THEIR MONTHLY BILLS BECAUSE OF WHAT THESE DIRTY, GREEDY BASTARDS DID…They keep recycling the same old lies…They should all get life in prison, including those who are covering up…that is TREASON!!

  3. Ron Moss says:

    Fortunately, this nation is not run by mafia al Capones any more, it is run by we the people

  4. CaitlinO says:

    This is an admission of incompetence. William Black didn’t let the difficulty get in his way in the wake of the S&L scandal when he successfully gained more than 1000 CRIMINAL convictions. If the bozos in the government can’t get it done, bring in Black. give him full power of investigation and let him do it for them.

  5. John says:

    This thinking opens a door we sure don’t want opened.

    When folks think they can do what is being done by some is not going to be prosecuted, then why not all do it.

    Our financial problems are just beginning!

    Talk about Rome being crooked, we are going to show them something I’m afraid.

  6. Hell No - No More Bleeping Bankster Bailouts says:

    Cardona needs to be sent some special cologne so he smells just like the load of shit that comes out of his mouth. “Ode de Bull” should be the big seller for sending to government and anyone you know with the Banksters and Wall Street. A second choice should be “Ode de Skunk”. At least the skunk logo would have a single stripe. It could be packaged with a striped jumpsuit. Cardona and the other officials deserve to be prosecuted themselves for their failure to act on the part of the citizens.

  7. see says:

    Fire all these lazy a$$es and get people in there who don’t think their job is too hard.

  8. And you wonder why is the OWS movement protesting in the streets? support the movement !

  9. Drew says:

    Some people I talk to at work would just say that is the way it is and there is nothing that can be done. It’s that attitude that keeps this from getting attention.

  10. Fred Grant says:

    What an appalling statement. Can you imagine people saying that the rule of law is just too hard? Oh wait, it has been said. Game over folks, this little housing crisis is but a road sign signaling some serious stife ahead. Justice corrupted!

  11. Our go vernment repres. owe a fudiciary duty to protect us. They need to be held accountable for not protecting us and for passing unconstitutional law that allows this crime. It was all by design. Nothing is to hard if you have a goal to do it. It is only to hard if they are bought.

  12. Tim Bryant says:

    Just arrest the corporation in it’s “personhood”.

  13. Pamela Edwards says:

    Where is Law and Order when you need them?

  14. Ron Moss says:

    On the other hand I can teach my kids that crime does pay.

    • Mary says:

      WHAT! WHAT!! WHAAAAT!!!!!! Total conspiracy!! Lets face it….unless the American people get mad enough and decide to fight and save themselves we are doomed.

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