Individuals Causing the 2008 Housing Crisis Receive No More Than a Slap on the Wrist

Following the 2008 housing crisis, several of the banks involved paid large settlement fines. JPMorgan Chase was one of those banks. The Justice Department used evidence from an anonymous whistleblower in the prosecution, but until recently the whistleblower remained anonymous. Matt Taibbi recently released an article in Rolling Stone describing why the whistleblower, Alayne Fleischmann, has gone public with what she knows. Ironically, the Justice Department wasn’t committed to bringing “justice” to those individuals who contributed to the fall of the economy through fraudulent activities. In fact, Attorney General Eric Holder said the following:

“I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy, and I think that is a function of the fact that some of these institutions have become too large.”

What is the Justice Department doing if they aren’t bringing justice to those responsible for major crimes? When Fleischmann realized that much of what she reported to the SEC and the Justice Department was not being fully pursued, she decided she had to go public with what she knew.

Connections Between the Big Banks and Holder's Justice Department: No Wonder There Aren't Criminal Cases

Eric Holder (from The Guardian)

A story in The Guardian discusses connections that Eric Holder and Lanny Breuer have with a law firm, Covington & Burling, that represents several big banks. The Guardian article gets key information from an NPR story including this connection between Holder and Breuer and the big banks:

Justice Department Admits They're Soft on Fraud

As I've said in several posts in the past, including this one, the Justice Department under this administration is very soft on prosecuting fraudsters. As a result, the key players who caused the mortgage meltdown have been essentially given a "get out of jail free" card. Interestingly, Eric Holder, head of the Justice Department has even admitted that they don't prosecute fraudsters. In Holder's view, doing so would hurt the economy! Amazing!! This definitely explains a lot... Here is a great write up of this absurd and twisted logic by Barry Ritholz...It's pretty short and well worth reading.

The Real Winners in the Lance Armstrong Investigation: His Attorneys

Photo taken from Forbes.com

In most fraud cases, the real winners are the attorneys. This is definitely looking to be the case  with Lance Armstrong since he is getting sued left and right these days. Not only has the US Justice Department joined in Floyd Landis's suit claiming Lance defrauded the US Postal Service but numerous other lawsuits and legal actions are being filed daily. While the suit by the US Postal Service could, in theory, add up to over $100 million, these other suits could also add up to real money too, especially when you consider all the legal fees his attorneys must be charging him. For example, I learned about the following two new lawsuits today...

Lance Armstrong Investigation: Fed to Join Landis in Suing Lance, Weisel and Stapleton

This is hot off the press and, from what I can tell, was first published by the Wall Street Journal. Amidst speculation in the past few days that the Department of Justice was not going to join in the whistleblower lawsuit filed by Floyd Landis, the WSJ is saying they are going to join in. This is bad news for Lance, Thom Weisel and Bill Stapleton since Lance has now stated publicly that he was doping. On the other hand, this is good news for Floyd Landis who could end up a multi-millionaire as a result of this lawsuit. Here are some key fraudbytes from the WSJ article:

Lance Armstrong Investigation: Criminal Charges May Be in the Works

According to CBS News, federal investigators are considering criminal charges against Lance Armstrong. The main charges being considered are obstruction of justice, intimidation and witness tampering. I'd say intimidation is his specialty but the others are right up his alley too.

This investigation comes after the original criminal investigation was suddenly dropped a year ago by the now, infamous, Andre Birotte. Birotte had a few words about his investigation saying that he basically stands by his decision to drop it.

Here are some excerpts from CBS News:

Feds Joining Suit Against Lance Armstrong

CBS News reported yesterday that the federal government is considering joining in Floyd Landis's lawsuit against Lance Armstrong which alleges that he defrauded the government due to his doping while receiving $30 million in sponsorship funds from the US Postal Service. My understanding is that the government could receive treble damages for this lawsuit which would amount to $90 million. Lance would not be the only one to be hurt by this.

A tweet this afternoon by CBS News says that they have learned that Lance offered to settle with the government for $5 million and that he offered to be a cooperating witness in a federal investigation. The tweet claims that the Department of Justice turned down both offers.

If this is true, it suggests that the federal government will be joining in the lawsuit against Lance and they expect to go for significantly more than $5 million. The saga continues...

Lance Armstrong Investigation: Lance and Landis Competing Again

The competition between Lance Armstrong and Floyd Landis isn't in the French Alps but, instead, may be in a U.S. federal court room. The Wall Street Journal reported today that Lance's troubles with Landis and the Department of Justice are still ongoing. Floyd was astute enough to file a whistleblower lawsuit against Lance under the Federal False Claims Act which allows whistleblowers to collect up to 30% of any recovery by the Federal Government if the government sues an individual for defrauding them. When Lance was sponsored by the U.S. Postal Service he was prohibited from doping by his contract with the USPS. Unfortunately for him, just when Lance probably would like to pay his last legal bill, it sounds like he may be supporting his all-star legal team for some years to come. Here's what the Wall Street Journal has to say about it...

Lance Armstrong Investigation: USADA Under Political Pressure

Congressman Sensenbrenner

Well, you have to hand it to Lance. Just when it looks like he will receive some consequences for the massive doping that his teammates have allegedly accused him of, cases are closed and politicians come to his rescue. First the DOJ drops his case earlier this year with virtually no explanation and now a Congressman from Wisconsin is putting pressure on USADA to back off. Amazing!

Here is some more information from an article on VeloNews: 

The congressman, James Sensenbrenner, wrote a letter to the Office of National Drug Control Policy (ONDCP) which oversees USADA and stated: 

“The U.S. Congress has no role in determining whether an individual athlete doped, but we do have a great interest in how taxpayer money is spent,” Sensenbrenner wrote in his letter to Kerlikowske.

He continued:

Sir Allen Stanford gets life sentence

Well, the US Justice Department comes through on Ponzi schemer, Allen Stanford and sentenced him to 110 years for running his $7 billion Ponzi scheme. 

Unless you follow fraud like I do, you probably have never heard of Stanford. That is one bizarre effect of the Bernie Madoff fraud. If Madoff hadn't come to light about two months before the Stanford fraud came to light, everyone would know Sir Allen since his Ponzi scheme would have been known as the largest in history, by far. If you want to learn more about Sir Allen, including why I refer to him as "Sir" you can read the posts linked here.

Now, I just hope the Justice Department decides to prosecute some of the fraudsters who caused the mortgage meltdown and put the world economy in a the great recession...

Lance Armstrong Investigation: It's Not Over Yet...

Photo taken from WSJ.com (Gettty Images)

Just when you thought maybe the Lance Armstrong doping investigation was going to be over, USADA charged him yesterday with being involved in a massive doping conspiracy for over a decade. Now, I have to ask myself, if USADA doesn't have much of a case would they dare dig this up again and take on the amazing Mr. Armstrong again? I mean, doping charges against Lance have been about as effective as efforts to balance the US budget have been! Of course, no criminal charges in serious cases in the US have gone anywhere lately so Lance is joined by all sorts of high profile fraudsters in dodging criminal bullets. As to these charges, they aren't criminal but they could mean he loses his seven yellow jersey titles if they do stick. Here is a summary of the news, hot off the press:

More on Fraud and the US Department of Justice

In several recent posts, I've been critical of the US Department of Justice's extremely poor record of prosecuting Wall Street executives who were a big cause of our current economic crisis. The executives of numerous large financial institutions took home hundreds of millions in compensation while pushing their firms to commit illegal business practices. It's obvious that basic mortgage fraud was rampant in many organizations and yet virtually no one has gone to jail yet.

Surprisingly, the lack of vigilance by the current administration is so blatant that even the NY Times has published an editorial by one of its columnists that says the current Democratic administration panders to business more than past GOP administrations did! I'd like to see a study of how often the NY Times has compared a Democratic administration to a Republican one and found the scale tipped to the GOP side of things. It has to be rare.

I recommend reading the analysis that this editorial gives and see if you agree with the bottom line that this editorial makes:

Amazing, isn’t it? George W. Bush has turned out to be tougher on corporate crooks than Barack Obama.

Wow--from the NY Times no less! Can Eric Holder and President Obama fall any further than that?!

Fraud and the Mortgage Meltdown

Charles Ferguson, the person who created the documentary on the mortgage meltdown "Inside Job," has written a book on the topic titled "Inside Job: The Financiers Who Pulled Off the Heist of the Century." I can only seem to find it on Amazon's UK website so I don't know if it will be available in the US. In any case, this article in the Guardian, written by Ferguson, has some interesting comments about the fact that the Obama administration and the US Justice Department is not prosecuting anyone. Ferguson also names several banks that he claims were complicit in the meltdown and committed various forms of fraud. He says that It's pretty disheartening to think this much corruption exists in the financial industry and the government isn't doing much to hold anyone accountable for it. Here are a few excerpts:

Lehman Brothers and the U.S. Department of InJustice

60 Minutes aired what is likely to be the last segment on the global mortgage meltdown and how the U.S. Department of Justice has essentially given the key players a "Get out of Jail Free" card. The latest segment focuses on the Lehman bankruptcy and the fraud involved in that case. Steve Kroft of 60 Minutes says that he has given up hope that the Department of Justice or the SEC will bring any charges against the key players. He says that he is "astounded" that the government has failed to bring cases against the key individuals. In the main video...

Wall Street Justice III: Fraud Pays in Healthcare Industries

One of my students forwarded me a link to an article describing numerous pharmaceuticals that have committed fraud only to have the CEO receive a hand slapping and a multi-million dollar bonus on the way out the door. Here are a few of the cases mentioned in the Forbes article:

Wall Street Justice: An Oxymoron?

It looks like the U.S. Department of Justice has decided to give Wall Street firms and their top executives a "get out of jail free" card over the last several years. The latest example of this is the MF Global scandal with the former governor of New Jersey, Jon Corzine, and company appearing to get away with $1.6 billion of customer assets that are "missing." An Op-Ed in the NY Times explains Corzine's crimes this way:

Lance Armstrong Investigation: Petition Opened

I received an email today that informed me about a petition on the White House website asking for President Obama's administration to look into and comment on the reason that the Justice Department dropped the Lance Armstrong investigation. The petition (click here to go to the petition) requires 25,000 signatures. Last I checked it only had about 100 signatures so it has a way to go. If you're interested in finding out more about why this investigation was closed, you might want to take a minute to sign the petition and pass this link on to friends who also might be interested.

Political Perks: Evidence of Insider Trading in Washington

When it comes to insider trading cases, probably none have been as big as the recent conviction of the billionaire Raj Rajaratnam, former hedge fund manager and founder of Galleon Group. (See our prior posts on Rajaratnam here.)

Rajaratnam had a huge web of contacts that fed him with insider information which he then traded on to make billions and to obtain abnormal returns for investors in his hedge funds. His case has been hailed as a huge victory for the US Justice Department in an effort to crack down on what is believed by some to be a widespread problem in our capital markets.

There is now evidence suggesting that the Justice Department may not need to look so far from Capital Hill to find rampant insider trading. A new study...

First Major Criminal Conviction Related to the Mortgage Meltdown

Lee Farkas in front of his private jet in 2005

The Justice Department is celebrating this week after finally landing a major criminal conviction in the aftermath of the mortgage meltdown. The Justice Department was able to stick 14 counts of fraud and conspiracy on Lee Farkas in what is reported to be a $2.9 billion mortgage fraud scheme. Mr. Farkas operated a huge mortgage business, known as Taylor, Bean and Whitaker.

Taylor Bean apparently sold billions of dollars of mortgages to Fannie Mae and Freddie Mac and obtained loans from large U.S. and foreign banks that were collateralized with fictitious mortgages or mortgages already sold to others.

As is common with many fraudsters, Mr. Farkas had an appetite for material possessions that led him to spend at least $20 million of other peoples' money on things like fancy homes, classic cars and even a private jet (see the photo to the right). According to the NY Times,