Wall Street Corruption

Eric Holder Says Justice Department Has Moles on Wall Street

U.S. Attorney General Eric Holder Testifying on High Frequency Trading Before the House Appropriations Committee on April 4, 2014

U.S. Attorney General Eric Holder Testifying on High Frequency Trading Before the House Appropriations Committee on April 4, 2014 | No attribution

This is excellent news because those guys truly believe they are “The Masters of the Universe“.  Now let’s see a few of their bubbles burst…H/t: PamK741

Wall Street On Parade – 9-23-2014

In addition to hundreds of Federal bank examiners permanently stationed at Wall Street’s biggest banks by the Federal Reserve and Office of the Comptroller of the Currency in an effort to eradicate a serial crime spree, an unknown number of Justice Department moles are now roaming about the mahogany corridors of power, chatting up potential criminals around the water cooler and hoping to make it out alive before being detected.

Avoiding detection as a mole becomes so much more challenging when the highest law enforcement officer in the land, U.S. Attorney General Eric Holder, comes to New York to address Wall Street’s lawyers and tells them, flat out, that he’s got moles stationed inside his Wall Street targets. (There were likely 100,000 text messages flying about Wall Street before Holder got to the next paragraph of his speech.)

The revelation by Holder came on September 17, not in off the cuff remarks, but in a carefully prepared speech delivered at NYU School of Law in Manhattan. Discussing an insider trading case, Holder stated:

“It was only because the government had a cooperating witness inside the company – a witness who had agreed to wear a wire – that the department was able to record a verbal account of these actions, to illuminate other obstruction, and to uncover illegal conduct that otherwise might never have come to light.

“Similarly, in our full-court press to investigate and prosecute the ongoing LIBOR matter – which is being led by the Criminal and Antitrust Divisions, and involved a wide-ranging scheme to rig one of the world’s benchmark interest rates – witnesses from inside some of the world’s leading financial firms have played important roles.  They have strengthened our ability to follow leads; to obtain guilty pleas from subsidiaries of major banks like UBS and RBS; and to pursue individual charges against nine former traders and managers at these institutions. Our ongoing investigation into the manipulation of foreign exchange rates has relied on similar investigative techniques involving undercover cooperators, as well.” [Italics added.]

We learn two things in that last sentence. Moles are now called “undercover cooperators” by the U.S. Justice Department and the U.S. Attorney General wants Wall Street to know they’re there.

One can just imagine the paranoia that has spread exponentially on Wall Street since September 17. Every question asked by a colleague is assumed to be a trap. Every wrinkle in those crisp, $400 Gekko shirts is assumed to be a wire. A pair of new eyeglasses might be equipped with a Justice Department mic.

So why would Eric Holder want to throw cold water on all that wonderful synergism on Wall Street — “The Cartel” and “The Bandits’ Club” in the world of foreign currency trading come to mind.

Based on the rest of Holder’s speech, one has the feeling that since multi-billion dollar fines have not worked; deferred prosecutions have not worked; the 849-page Dodd-Frank Wall Street Reform and Consumer Protection Act didn’t work; and perp walks of the lower ranks haven’t worked, the new crime deterrent strategy on Wall Street appears to be to spread the word of an army of moles hiding out in bathroom stalls, boardrooms, and perched on bar stools to record loose tongues.

Holder is nothing if not straight-forward. He came right out and acknowledged that  those jaded ways of Wall Street that collapsed the financial system six years ago are back. “…we are already witnessing a troubling return to some of the very same profit-driven risk-taking that contributed to the 2008 collapse,” said Holder.

Holder went to great lengths to explain how hard it is to prosecute Wall Street’s top dogs, saying it “is true for any number of reasons – from possible advice-of-counsel defenses; to the adequacy or inadequacy of written disclosures; to the difficulty to establish materiality and intent.  And in some instances, it is simply not possible to establish knowledge of a particular scheme on the part of a high-ranking executive who is far removed from a firm’s day-to-day operations.”

The new thinking at the Justice Department, according to Holder, involves incentivizing individuals. Holder told the audience of lawyers: “…no financial fraud case is prosecutable unless we have sufficient evidence of intent – we should seek to better equip investigators to obtain this often-elusive evidence.  This means, among other things, thinking creatively about ways to incentivize witness cooperation and encourage whistleblowers at financial firms to come forward.”

One way to do that, according to Holder, is to increase the bounty for whistleblowers on Wall Street to the one-third of recovered amounts that can be paid to whistleblowers under the False Claims Act, which is limited to fraud against government-funded programs. Holder said he would “implore” Congress to take that action.

Holder explained further:

“…the Justice Department has come to rely on a statute known as the Financial Institutions Reform, Recovery, and Enforcement Act – or FIRREA – a little-used law passed after the savings and loan crisis of the 1980s.  Over the last few years, the Residential Mortgage-Backed Securities Working Group – a part of the President’s Financial Fraud Enforcement Task Force – has been aggressive in using this law to develop the types of cases that have resulted in major settlements with JPMorgan, Citigroup and Bank of America, among many others…

“Like the False Claims Act, FIRREA includes a whistleblower provision.  Butunlike the FCA, the amount an individual can receive in exchange for coming forward is capped at just $1.6 million – a paltry sum in an industry in which, last year, the collective bonus pool rose above $26 billion, and median executive pay was $15 million and rising.

“In this unique environment, what would – by any normal standard – be considered a windfall of $1.6 million is unlikely to induce an employee to risk his or her lucrative career in the financial sector.”

So the new plan at Justice to rein in an unrepentant Wall Street appears to be spreading moles about like rat traps in an infested basement while dangling the incentive cheese that they may be able to retire sooner and better off than their bosses.

Of course, there is also the less taxpayer-costly plan of simply breaking up these global behemoths so that they can’t ever again crash the economy by restoring the one law that actually worked for 66 years – the Glass-Steagall Act.

Bank Of America Liable For Fraud In Countrywide Mortgage Case: Jury

bank of america fannie

Bank of America Corp. signage is displayed outside of a branch in San Francisco, California, U.S., on Thursday, Dec. 22, 2011. San Francisco, one of the top tourist destinations in the world, is a principal banking and finance center as well as home to more than 30 international financial institutions which helps rank it eighteenth in the world’s top producing cities, ninth in the U.S., and ninth place in the top twenty global financial centers. Photographer: David Paul Morris/Bloomberg via Getty

It took over six years but finally, they’ll have to pay for their treatment of hard working Americans, one person at a time.

The Huffington Post

* Bank found liable on one civil fraud charge

* Verdict seen as a major win for the U.S. govt

* Former Countrywide exec found liable on one fraud charge

By Nate Raymond

NEW YORK, Oct 23 (Reuters) – Bank of America Corp was found liable for fraud on Wednesday over defective mortgages sold by its Countrywide unit, a major win for the U.S. government in one of the few trials stemming from the financial crisis.

After a four-week trial, a federal jury in New York found the bank liable on one civil fraud charge. Countrywide originated shoddy home loans in a process called “Hustle” and sold them to government mortgage giants Fannie Mae and Freddie Mac, the government said.

The four men and six women on the jury also found former Countrywide executive Rebecca Mairone liable on the one fraud charge she faced.

The U.S. Justice Department has said it would seek up to $848.2 million, the gross loss it said Fannie and Freddie suffered on the loans. But it will be up to U.S. District Judge Jed Rakoff to decide on the penalty. Arguments on how the judge will assess penalties are set for Dec. 5.

Any penalty would add to the more than $40 billion Bank of America has spent on disputes stemming from the 2008 financial crisis.

“The jury’s decision concerned a single Countrywide program that lasted several months and ended before Bank of America’s acquisition of the company,” Bank of America spokesman Lawrence Grayson said. “We will evaluate our options for appeal.”

Marc Mukasey, a lawyer for Mairone, called his client a “woman of integrity, ethics and honesty,” adding they would fight on. “She never engaged in fraud, because there was no fraud,” he said.

Wednesday’s verdict was a major victory for the Justice Department, which has been criticized for failing to hold banks and executives accountable for their roles in the events leading up to the financial crisis.

The government continues to investigate banks for conduct related to the financial crisis. The verdict comes as the government is negotiating a $13 billion settlement with JPMorgan Chase & Co to resolve a number of probes and claims arising from its mortgage business, including the sale of mortgage bonds.

RISKY LOANS

The lawsuit stemmed from a whistleblower case originally brought by Edward O’Donnell, a former Countrywide executive who stands to earn up to $1.6 million for his role.

The case centered on a program called the “High Speed Swim Lane” – also called “HSSL” or “Hustle” – that government lawyers said Countrywide started in 2007.

The Justice Department contended that fraud and other defects were rampant in HSSL loans because Countrywide eliminated loan-quality checkpoints and paid employees based on loan volume and speed.

The Justice Department said the process was overseen by Mairone, a former chief operating officer of Countrywide’s Full Spectrum Lending division. Mairone is now a managing director at JPMorgan.

Amy Bonitatibus, a JPMorgan spokeswoman, said, “We are reviewing the decision.”

About 43 percent of the loans sold to the mortgage giants were materially defective, the government said.

Bank of America bought Countrywide in July 2008. Two months later, the government took over Fannie and Freddie.

Bank of America and Mairone denied wrongdoing. Lawyers for the bank sought to show the jury that Countrywide had tried to ensure it was issuing quality loans and that no fraud occurred.

The lawsuit was the first financial crisis-related case against a bank by the Justice Department to go to trial under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA).

The law, passed in the wake of the 1980s savings-and-loan scandals, covers fraud affecting federally insured financial institutions.

The Justice Department, and particularly lawyers in the office of U.S. Attorney Preet Bharara in the Southern District of New York, have sought to dust off the rarely used law and bring cases against banks accused of fraud.

Among its attractions, FIRREA provides a statute of limitations of 10 years and allows the government to bring civil cases for alleged criminal wrongdoing.

Virginia Gibson, a lawyer at the law firm Hogan Lovells, said the Bank of America verdict was a “big deal because it shows the scope of a tool the government has not used frequently since its inception.”

Gibson and other lawyers say any appeal by Bank of America would likely focus on a ruling made by the judge before the trial that endorsed a government position that it can bring a FIRREA case against a bank when the bank itself was the financial institution affected by the fraud.

The case was one of three lawsuits in New York where judges had endorsed that interpretation. Banks have generally argued that the interpretation is contrary to the intent of Congress, which they said is more focused on others committing fraud on banks.

Bank of America’s case was the first to go to trial, a rarity given that banks more typically choose to settle government claims instead of face a jury. But Bank of America had said that it “can’t be expected to compensate every entity that claims losses that actually were caused by the economic downturn.”

In a statement, Bharara said Bank of America “chose to defend Countrywide’s conduct with all its might and money, claiming there was no case here.”

“This office will never hesitate to go to trial to expose fraudulent corporate conduct and to hold companies accountable, particularly when it has caused such harm to the public,” Bharara said.

In late afternoon trading, Bank of America shares were down 27 cents at $14.25 on the New York Stock Exchange.

The case is U.S. ex rel. O’Donnell v. Bank of America Corp et al, U.S. District Court, Southern District of New York, No. 12-01422.

Matt Taibbi: ‘Occupy Wall Street’ can spark movement, motivate change

Raw Story

Author and Rolling Stone columnist Matt Taibbi appeared on Countdown with Keith Olbermann to discuss the “Occupy Wall Street” protests and their potential for motivating change.  The protest, as it stands, is mostly made up of young people who are feeling fed up and disaffected, but Taibbi sees the protests as a reflection of real anger on the part of the American people, anger that rises out of the sense that Wall Street controls too much of American political life.   Activists whose work centers around these issues, he says, can point to the protests as a manifestation of genuine distress on the part of the public.

Keith poses the question as to whether a gathering of Tea Party protests would have garnered more media attention. At the end of the segment, he quips that maybe the “Occupy Wall Street” crowd needs more “funny hats”.

New York City Police Use 150-Year-Old Law Against Wearing Masks To Arrest Wall Street Demonstrators

Where are the mainstream media reports on the Wall Street demonstrations?

Think Progress

As ThinkProgress previously reported, hundreds of demonstrators have encamped themselves in the financial district in New York City, hoping to call attention to Wall Street’s misdeeds.

Yesterday, seven protesters were arrested by the New York Police Department, despite being peaceful and not noticeably disrupting the normal activities of the city. The Wall Street Journal notes that the charges being brought against these demonstrators include “loitering and wearing [a] mask.” The Village Voice points out that the anti-mask law being used against demonstrators dates back to 1845, when farmers wore masks to conduct attacks against the police. The law was updated in 1965 to “prevent masked gathering of two or more people,” unless they are throwing masquerade parties:

The anti-mask law goes back to 1845, when tenant farmers used disguises (dressing up like Indians) to attack law enforcement officials, apparently. In 1965 the law was updated to prevent masked gatherings of two or more people, except in the case of masquerade parties. Whew.

Demonstrators took video of the arrests of some of the protesters. One of the protesters is simply wearing a plastic mask on the back of her head:

The occupation and protests on Wall Street are now entering their fifth day. Protesters are requesting on their website that people donate money for food for the demonstrators, and note that more than $9,000 has been donated so far.

The occupation and protests on Wall Street are now entering their fifth day. Protesters are requesting on their website that people donate money for food for the demonstrators, and note that more than $9,000 has been donated so far.

Related articles