What Happened When the FBI Investigated Foreclosure Fraud in Florida
By David Dayen
Six years ago, FBI agents in Jacksonville, Florida, wrote a memo to their bosses in Washington, DC, that could have unraveled the largest consumer fraud in American history. It went to the heart of the shady mortgage industry that precipitated the financial crisis, and the case promised to involve nearly every major bank in the country, honing in on the despicable practice of using bogus documents to illegally kick people out of their homes.
But despite impaneling a grand jury, calling in dozens of agents and forensic examiners, doing 75 interviews, issuing hundreds of subpoenas, and reviewing millions of documents, the criminal investigation resulted in just one conviction. And that convict—Lorraine Brown, CEO of the third-party company DocX that facilitated the fraud scheme—was sent to prison for duping the banks.
Thanks to a Freedom of Information Act request, VICE has obtained some 600 pages of documents from the Jacksonville FBI field office showing how agents conducted a sprawling investigation. The documents suggest the feds gained a detailed understanding of how and why the mortgage industry enlisted third-party companies to create false documents they presented to courts, as detailed in the 2012 National Mortgage Settlement, for which the big banks paid billions in civil fines. The banks’ conduct is described in the settlement documents as “unlawful,” and the Jacksonville FBI had it nailed almost two years earlier.
In these case files, you can see the seeds of an alternative history, one where dedicated law enforcement officials take on some of the country’s most powerful financial institutions with criminal prosecutions.
So why didn’t they?
Find out here…
This story expands on David Dayen’s new book Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud, the winner of the Studs and Ida Terkel Prize out this month from The New Press. Follow David Dayen on Twitter.