Primary Source Records · Source Documents
StopFraud.gov
The site of the interagency task force set up after the financial crisis to coordinate mortgage, securities and rescue-fraud prosecutions, carrying its case announcements and its account of what it was doing. How the government described its own response to the crisis is a contested historical question, and this is the primary evidence. The host no longer resolves. 40 pages are held here, recovered from the Internet Archive.
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- 2012
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- United States
- Language
- English
- Rights
- Public domain. A work of the United States Government is not subject to copyright under 17 U.S.C. § 105, so it is held in full with no exception claimed and none needed. Published by Financial Fraud Enforcement Task Force, U.S. Department of Justice at stopfraud.gov, where the host no longer resolves in DNS as last checked on 2026-09-22.
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- https://stopfraud.gov/
Full text
STOPFRAUD.GOV Financial Fraud Enforcement Task Force, U.S. Department of Justice
Captured from the Internet Archive on 2026-09-22. stopfraud.gov no longer resolves in DNS. This file holds 40 pages, the most substantial the Archive has for that host. It is a capture of a site, not a complete mirror of it: pages the Archive never visited are not here, and neither are images, downloads or anything the site generated for a logged-in visitor. Each page is headed with its title, its address and its capture date.
Welcome to the United States Department of Justice www.stopfraud.gov/iso/opa/stopfraud/ag-speech-140917.html — captured 2015-01-23
Thank you, Professor [Jennifer] Arlen, for those kind words – and thank you all for being here. It’s a privilege to be at New York University this afternoon. And it’s an honor to stand with so many judges, U.S. Attorneys, and prominent leaders in the field of corporate compliance and enforcement – as well as the law students, faculty members, administrators, staff and alumni who make this institution such a remarkable place.
I’d like to thank Dean [Trevor] Morrison, Executive Director Serina Vash and her colleagues from the Program on Corporate Crime and Enforcement – along with the Milbank Tweed Forum – for hosting today’s event. It’s great to be with such a distinguished group. And it’s a pleasure, as always, to be back home in New York City.
Like many of you, I grew up not far from here. I know that, as this city’s oldest law school, NYU has long provided a unique forum – and an essential training ground – where current and future leaders come together to exchange ideas, to challenge accepted wisdom, and to discuss some of the most complex issues facing members of our profession. Today, as we turn our attention to just such a challenge, I believe it’s fitting that we do so in the heart of this great city – just a few short miles from the epicenter of what began, in 2008, as a financial tremor, but quickly grew to become a nearly unprecedented global meltdown.
It was six years ago this week that the storied investment bank Lehman Brothers filed for bankruptcy after more than a century and a half in business – marking the culmination of a period of deregulation, excessive risk-taking, questionable lending practices, and defective underwriting that heralded the worst financial crisis since the Great Depression. Since that time, thanks to President Obama’s leadership – and the hard work and resilience of the American people – our economy has recovered faster than that of almost any other nation. We’ve seen 54 straight months of job growth – the longest streak on record – during which the private sector has added 10 million jobs. And we’ve taken a range of other significant steps forward.
As President Obama explained this summer, over the past six years, financial firms have returned to profitability. Thanks to measures like the Dodd-Frank Act – designed to restore stability to the system as a whole and rebuild the kind of commonsense regulatory environment that was gradually eroded by special interests over the course of the last few decades – these companies are now required to maintain more robust capital reserves that decrease the risk that each institution poses to the broader economy.
Yet – even now – the scars of the Great Recession, its lingering impacts, and its echoes throughout our financial system are not hard to find. More remains to be done when it comes to creating jobs, growing the middle class, and helping the long-term unemployed get back on their feet. And as the President also noted, despite the progress we’ve seen and the safeguards we’ve implemented, we are already witnessing a troubling return to some of the very same profit-driven risk-taking that contributed to the 2008 collapse.
As this conduct begins to reemerge on Wall Street, it raises questions anew about the extent to which these activities may involve criminality – and may be prosecutable as fraud. Or, if these activities do not constitute illegal conduct, whether they should . That’s why – today – I believe we’re faced with an important opportunity: to leverage the insights, the experience, and the lessons learned from investigating the last crisis to the potential cases unfolding before us today. To work alongside congressional leaders to secure the added legal tools necessary to police illegal financial activities in real-time. And to obtain the resources, and foster the expertise, that law enforcement needs to keep pace with evolving challenges – so we can prevent the next financial bubble from spiraling into the next full-blown economic crisis.
For my colleagues and me – at every level of the Department of Justice – instilling in others an expectation that there will be tough enforcement of all applicable laws is an essential ingredient to ensuring that corporate actors weigh their incentives properly – and do not ignore massive risks in blind pursuit of profit. All business enterprises naturally involve a degree of risk-taking. That’s both necessary and healthy. But when companies place exceedingly risky bets relying on federally-insured capital – and when they reap massive financial benefits regardless of whether those bets pay off – all Americans should be concerned. When those outsize returns rely on false representations to investors or counterparties, it may well entail fraud. And both regulators and law enforcement authorities should take appropriate notice.
For the Justice Department, this means standing vigilant against financial fraud wherever it is uncovered – and never hesitating to prosecute criminal conduct to the fullest extent of the law. Over the past six years, my colleagues and I have been aggressive in bringing cases whenever they are warranted – and where we have enough evidence to bring charges. In doing so, different outcomes have been appropriate in different circumstances.
In situations where fraud has been uncovered within a company, we have often sought to hold the corporation itself responsible. Because we understand that where institutions themselves have failed – or where pervasive cultures of illegality and irresponsibility have taken hold – it’s necessary to pursue institutional accountability to bring about fundamental changes.
This sometimes has taken the form of civil settlements. With Citi, JPMorgan Chase and Bank of America, we achieved three of the largest settlements in the nation’s history for conduct related to the mortgage crisis. And in addition to imposing significant penalties, we took steps to both ensure accountability and provide relief to many consumers who continue to struggle in the housing market. We insisted that the financial institutions agree to clear, public statements about the misconduct that gave rise to the resolutions. The impact of the cases we bring extends beyond those whose wrongdoing is at issue – because we want others to understand what the defendants did, why it was unlawful, and how the conduct affected the American public. And additional matters remain pending.
In other circumstances, we have pursued criminal charges against corporate actors. From both Credit Suisse and BNP, we secured criminal guilty pleas to go along with multi-billion-dollar penalties. After years of speculation that some firms might be considered too systemically important to face criminal charges, the cases against Credit Suisse and BNP proved that no institution is too large to prosecute. We have put that myth to rest once and for all. We demonstrated in those cases that prosecutors are capable of collaborating with financial regulators to hold banks criminally to account. And going forward, we must harmonize our domestic regulatory scheme with its global counterparts. This will enable us to pursue even more criminal cases against other bad-actor institutions in the future – no matter their size.
In total, the Justice Department has brought over 60 cases against financial institutions since 2009, resulting in recoveries totaling over $85 billion. Alongside attorneys from the Criminal and Civil Divisions, our U.S. Attorneys have provided critical leadership in this regard – including three of our best – Preet Bharara, of the Southern District of New York; Loretta Lynch, of the Eastern District of New York; and Paul Fishman, of the District of New Jersey – all of whom we’re fortunate to have with us this afternoon.
But whenever we have resolved these cases – whether they were civil or criminal in nature – we have almost always reserved the right to continue our civil and criminal investigations into individual executives at the respective firms. This is because, when it comes to financial fraud, the department recognizes the inherent value of bringing enforcement actions against individuals, as opposed to simply the companies that employ them. We believe that doing so is both important – and appropriate – for several reasons:
First, it enhances accountability. Despite the growing jurisprudence that seeks to equate corporations with people, corporate misconduct must necessarily be committed by flesh-and-blood human beings. So wherever misconduct occurs within a company, it is essential that we seek to identify the decision-makers at the company who ought to be held responsible.
Second, it promotes fairness – because, when misconduct is the work of a known bad actor, or a handful of known bad actors, it’s not right for punishment to be borne exclusively by the company, its employees, and its innocent shareholders.
And finally, it has a powerful deterrent effect. All other things being equal, few things discourage criminal activity at a firm – or incentivize changes in corporate behavior – like the prospect of individual decision-makers being held accountable. A corporation may enter a guilty plea and still see its stock price rise the next day. But an individual who is found guilty of a serious fraud crime is most likely going to prison.
Our record demonstrates that when the evidence and the law support it, we do not hesitate to bring charges against anyone . Between 2009 and 2013, the Justice Department charged more white-collar defendants than during any previous five-year period going back to at least 1994. Many of these prosecutions – which concerned a variety of individual conduct, including insider trading – were brought in the midst of a department-wide hiring freeze and other serious resource constraints. Yet these defendants have included CEOs, board members, and other executives of Wall Street firms, hedge funds, banks and other corporations – both within the United States and abroad – including former executives at UBS and Goldman Sachs; from Bank of America to Credit Suisse.
And with respect to mortgage fraud – which was at the heart of the financial crisis – the Justice Department has also taken aggressive action, nearly doubling the number of mortgage fraud indictments and criminal convictions between 2009 and 2010, then increasing them even further the following year. These statistics reflect a rapid mobilization of department resources during a critical period in the aftermath of the mortgage meltdown. And, for each of these years, the rate of conviction we achieved in mortgage fraud cases was approximately 93 percent.
Now, in many of these cases, the department was able to bring charges because our investigators uncovered clear evidence of defendants making false statements or filing fraudulent documents, enabling us to establish an intent to deceive and meet the high legal standard necessary to prove a fraud charge.
But when it comes to more complex transactions that involve more sophisticated traders – as opposed to run-of-the-mill “liar loan” cases or out-and-out Ponzi schemes – a criminal prosecution of an individual can be difficult, more complicated, to mount. This 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.
This has been a source of frustration for the public for a long time. I understand and share that frustration. But despite the commitment and tireless work of our prosecutors, we cannot bring cases unless, based upon the facts and the law, we believe that we are likely to succeed in court. That is consistent with the department’s long-standing principles of federal prosecution.
We must look deeper at these questions and several thoughts come to mind.
First, in an age when corporations are structured to blur lines of authority and prevent responsibility for individual business decisions from residing with a single person, we ought to consider whether the law provides an adequate means to hold the decision-makers at these firms properly accountable.
The Dodd-Frank Act took important steps to restore transparency and accountability in the banking industry; to curtail abusive practices targeting consumers; and to limit systemic risks posed by individual companies.
But it remains true that, at some institutions that engaged in inappropriate conduct before, and may yet again, the buck still stops nowhere. Responsibility remains so diffuse, and top executives so insulated, that any misconduct could again be considered more a symptom of the institution’s culture than a result of the willful actions of any single individual. This is a problem that the British government sought to address with a financial reform law it passed last year. For the first time, this measure required financial companies to designate an officer who would be accountable for misconduct at the firm.
This is the same principle behind the Sarbanes-Oxley requirement that a designated company executive must sign its accounting forms and bear liability for misrepresentations. Similarly, the Food, Drug and Cosmetic Act provides for the Congressionally-sanctioned “responsible corporate officer doctrine,” which – in the event that illegal activity is uncovered – allows for a criminal charge against the people in charge who were in a position to do something about it.
All of these approaches get at the same core concept: that the buck needs to stop somewhere where corporate misconduct is concerned. We ought to consider this further and modify our laws where appropriate. It would be going too far to suggest reversing the presumption of innocence for any executive, even one atop the most poorly-run institution. But we need not tolerate a system that permits top executives to enjoy all of the rewards of excessively-risky activity while bearing none of the responsibility.
Second – since 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.
As I indicated a moment ago, where the Justice Department’s prosecutions against individuals have been successful, we’ve been able to uncover sufficient evidence to prove intent to deceive on the part of a responsible person. But this evidence is often extremely difficult to come by. Many financial criminals are savvy enough to avoid using email, which may leave a trail for investigators to follow. And intent may only be evidenced sometimes in the form of verbal instructions – evidence that can provide the sort of “smoking gun” that is needed to secure a conviction, but that can only be attained from a cooperating witness.
For example, in a 2011 insider trading case brought by U.S. Attorney Bharara and his colleagues, two defendants saw media reports suggesting that federal authorities were closing in. In response, they destroyed evidence – deleting files, shredding documents, and even ripping apart a flash drive and scattering pieces into garbage trucks across New York City. 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.
Under an important law known as the False Claims Act, or FCA, the Justice Department has recovered more than $22 billion – since 2009 – from people who have defrauded the government. Many of these recoveries resulted from a strong whistleblower amendment – authored more than 25 years ago by Senator Charles Grassley – which allows citizens who provide evidence of fraud to receive, in some cases, up to about a third of the funds recovered by the government. Thanks to this robust provision, the FCA has also sometimes led to criminal charges against company executives.
These cases – and other investigations that are currently pending – illustrate the unique ability of cooperating witnesses to help federal authorities uncover sufficient evidence to meet a high burden of proof. But the FCA only applies to fraud on government-funded programs. Financial fraud, by contrast, typically also affects other banks, shareholders, or consumers.
To pursue these types of fraud cases, 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. Our use of this measure – to accuse financial institutions of committing fraud against themselves – was recently upheld in U.S. District Court here in the Southern District of New York, by Judge Jed Rakoff, among others.
Like the False Claims Act, FIRREA includes a whistleblower provision. But unlike 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. That’s why we should think about modifying the FIRREA whistleblower provision – perhaps to False Claims Act levels – to increase its incentives for individual cooperation. This could significantly improve the Justice Department’s ability to gather evidence of wrongdoing while complex financial crimes are still in progress – making it easier to complete investigations and to stop misconduct before it becomes so widespread that it foments the next crisis.
The value of conducting investigations in real time cannot be understated. As any U.S. Attorney can tell you, investigating these cases after the fact is incredibly resource-intensive, often requiring large teams of investigators and prosecutors to sift through millions of documents or terabytes of data – sometimes in foreign languages – over multiple years. In some cases, when the institutions being investigated are based outside the United States, we are unable to compel the production of certain documents or the testimony of certain witnesses. And most critically – as we saw in 2008 – while backward-looking investigations can rigorously hold people and institutions accountable for their actions, they come too late to prevent harm to consumers, the American public, and the economy at large.
Yet investigating financial crimes in real-time requires knowing where to look – which is exceedingly difficult at a time when financial innovation is occurring so quickly and constantly. Understanding the nature of what took place during the mortgage crisis is easy by the time Michael Lewis writes a book about it, but it is a lot harder to identify and grasp fast-emerging industry trends, and the opportunities for abuse they create, in the moment.
Realistically, staying ahead of these developments requires incentivizing individuals from within the industry to come forward and cooperate with ongoing investigations. And this brings me to my third point: because it also requires agents and investigators sophisticated enough to know what questions to ask and what to look for when those witnesses do come forward.
This, in turn, means we must ensure that the FBI has the necessary resources to conduct white-collar investigations; to foster expertise in specialties like forensic accounting; and to help us usher in a new era of aggressive enforcement that keeps pace with a rapidly-changing industry. While white-collar investigations were for years a bread-and-butter specialty of the FBI, since the terrorist attacks of September 11, 2001, the Bureau’s ranks of white-collar agents, experts, and analysts have not kept pace with our counterterrorism resources.
After 9/11, the FBI undertook a historic transformation – becoming an agile, threat-focused agency devoted to detecting, investigating, and preventing attacks, while holding would-be terrorists accountable. This was a laudable, logical shift that has led to tremendously effective counterterrorism work – and it is not going to be reversed anytime soon, given the current threat environment we face. So, while we justifiably continue to devote valuable resources to the fight against terrorism, we will also need to support the FBI with resources and personnel that can be brought to bear in our work to investigate financial crimes – and ensure that the Bureau can sustain a real-time, threat-focused mindset in the world of financial fraud.
After all, at its core, our ongoing fight against financial fraud isn’t just about good law enforcement. It’s about ensuring fairness for everyone who participates in our economy – from homeowners and private investors to major business leaders. It’s about preserving opportunities – and providing a level playing field – for people to innovate, to enrich themselves and our nation, and to fuel continued growth. And it’s about bringing accountability to both individuals and companies who take advantage of others, who violate the public trust, and who threaten the stability of our economy for financial gain.
Make no mistake: the Justice Department will continue to be relentless in our pursuit of anyone, anywhere, who violates the law. We have investigations open right now that are focused on the conduct of individuals at specific financial institutions. We are making good progress in these cases, which involve conduct that has undermined the integrity of our markets, and we expect to bring charges in the coming months. No company, executive, or employee is above reproach – no matter who they are, where they work, or how much they make. And my colleagues and I will never rest in our effort to catch these criminals – and to see that they are prosecuted to the fullest extent of the law.
This afternoon, as we look toward the future of this work – informed by our past experience and mindful of emerging challenges – I would like to feel confident in our ability, as a legal community and as a nation, to bring about the positive changes we seek. I implore Congress to consider the proposals I’ve outlined, and others, to strengthen our fraud-fighting tools; to advance equality, opportunity, and justice; and to encourage continued growth by laying out clear and consistent rules of the road. As I look around this crowd of friends, colleagues, and future leaders – of heirs to the storied legacy, and the unique history, of NYU Law – I am optimistic about your capacity to overcome the obstacles ahead. I’m proud to count you as colleagues in the pursuit of justice. And I look forward to where our collaborative efforts will take us – and where a new generation will lead us – in the months and years to come.
Thank you, once again, for inviting me to discuss these important issues with you today.
Welcome to the United States Department of Justice www.stopfraud.gov/iso/opa/stopfraud/ag-speech-1209221.html — captured 2012-09-27
Thank you, President Romasco, for those kind words – and for inviting me to be part of this important event. I wouldn’t have missed the opportunity to join you today – and I want you to know that I’m delighted to be here. Last night, I had the chance to spend some time with my oldest daughter, who just started her freshman year of college here in New Orleans. It was wonderful to see her. However, after taking in the college scene – and trying to relate to it – I must admit that it’s good to be among my peers.
So, I want to thank you all for welcoming me this morning. And I’d especially like to thank the AARP – and its outstanding leadership team and conference organizers – for bringing us together and creating a forum for this critical discussion.
After more than five decades of activism and advocacy, AARP is now 37 million members strong – and I’m proud to be counted among them. I’m also proud to be part of an organization that is working tirelessly to help empower people over the age of 50; that is helping to raise awareness about issues of challenge and consequence – issues that affect our safety, health, and financial security; and – above all – that is actively encouraging America’s seniors “to serve, not to be served.”
All across the country, AARP is leading efforts to instill this selfless spirit, to promote independence, and to inspire Americans from all backgrounds and walks of life to give back. Through initiatives like your “Create the Good” Campaign – and a host of programs and activities sponsored by the AARP Foundation – you’ve been instrumental in improving the quality of life for countless citizens as they enter their golden years. That’s especially true of your efforts to help aging Americans protect their hard-earned savings. For example, your “ElderWatch Project” – which, I understand, recently held a record-setting call-a-thon – is providing consumers with vital information on investment scams that target the “50 plus” population. The AARP Foundation, which now has seven call centers nationwide, is offering much-needed advice on how to guard against the latest telemarketing schemes. Through Webinars and Tele-town Halls, which showcase tips for helping seniors keep their money safe from scammers, you are reaching people in their own homes and communities. And by working with the U.S. Department of Justice to sponsor a series of Fraud Fighter Forums, you’re helping educate the public on how to avoid becoming victims of common financial scams. In these – and many other ways – you’ve proven your commitment to advancing the work we’ve gathered to discuss: preventing and combating financial fraud crimes.
This is a commitment that – at every level of today’s Justice Department and in each one of our 94 U.S. Attorneys’ Offices – my colleagues and I share. It’s been said – and I believe it’s true – that “the defining issue of our time… [is] how to keep the basic American promise alive.” You understand what that promise is all about – a sense of peace and security, and an assurance that our financial playing field is fair, open, and transparent.
It’s no exaggeration to say that this promise is precisely what’s at stake in our fight against financial fraud. Many of you have seen firsthand how common fraud crimes can devastate individuals and families – wiping out retirement funds and life savings. You know they can erode faith in our financial markets, threaten our nation’s ongoing economic recovery, and undermine the fabric of our communities. Particularly in recent years, we’ve come to understand that these crimes are most frequently committed – not by sophisticated criminal networks targeting financial centers – but by seemingly-trustworthy individuals who are willing to prey on their own neighbors, parishioners, coworkers, and even family members.
In cities and towns across America, the scars of financial fraud crimes – whether from investment fraud or bank fraud, from consumer fraud or mortgage fraud – can be clearly seen. And, unfortunately, aging and elderly Americans are often targeted. In fact, a recent study showed that roughly one in five Americans over the age of 65 has been victimized by a financial swindle. The losses suffered by these victims each year are staggering – totaling nearly $3 billion in 2010 alone. That’s an increase of 12 percent over the amount estimated just two years earlier, in 2008. But behind these numbers are stories that shock our collective conscience and break our hearts; stories of lost savings and dreams; of bankruptcies, forced moves and foreclosures, and unexpected debt; of seniors who once hoped to retire in peace and with dignity, but are now searching for jobs and living in poverty, fear, desperation, and dependency. Each one of these stories is unacceptable. That’s why today’s Justice Department has taken significant – and in some cases historic – steps to fight back.
Protecting the American people from financial fraud crimes – and safeguarding the most vulnerable members of society – is, and will remain, a Justice Department priority. Over the last few years, we’ve been focused on working in bold, innovative, and collaborative ways – and on utilizing the power of sound science and new technologies – to combat these terrible crimes. And we’ve placed a special focus on standing with our nation’s seniors – and working with strong allies like AARP – to more effectively protect their interests, investments, and hard-earned savings.
As many of you know, one important step was taken in 2009, when the Financial Fraud Enforcement Task Force was established. It is the biggest and broadest coalition of law enforcement officials, investigators, and regulatory agencies ever assembled to combat fraud. I am honored to chair this group. And I can attest to its powerful impact – in helping to streamline the investigative and enforcement efforts of multiple agencies and offices; to enlist new partners from across the private sector, as well as state, local, and tribal governments; and to advance cutting-edge strategies for recovering – and most efficiently utilizing – precious taxpayer resources.
As a result of the Task Force, our approach to identifying and combating financial fraud has been smart, systematic, and effective – and our results speak for themselves. Over the last three years, we successfully executed not only the largest financial and health-care fraud takedowns on record – but also the biggest bank fraud prosecution in a generation. We’ve secured charges – and record sentences of up to 60 years – in a wide range of cases against CEOs, CFOs, corporate owners, board members, presidents, general counsels, and other executives of Wall Street firms, hedge funds, and banks engaged in fraudulent activities. And in February of this year, in cooperation with the Department of Housing and Urban Development, 49 state attorneys general, and other partners – the Justice Department reached an historic $25-billion settlement with the nation’s top five mortgage servicers – the largest ever obtained. These results are a testament to the hard work of investigators, prosecutors, law enforcement officials, and analysts at every level of the Justice Department, in each of our U.S. Attorneys’ Offices, and across a variety of partner agencies and organizations.
With these partners, we’ve also moved to stem the recent, troubling rise in investment fraud schemes – from Ponzi schemes, to what are known as “grandparent schemes,” “lottery schemes,” “affinity fraud,” “phantom debt,” and “strike it rich” scams – that frequently target elderly middle-class individuals. We’ve learned that these crimes can be carried out in person, on the telephone, by mail, and over the Internet; and we know that, far too often, these victims are robbed of most, if not all, of their retirement savings.
In the face of such criminal activity, our response has been – and will continue to be – aggressive. Since the beginning of last year, the Justice Department’s Criminal Division – and 85 U.S. Attorney’s Offices – have reported cases related to investor fraud. And we’ve placed a special priority on combating investor fraud at the retail level – where the total reported fraud since early 2011 now tops $20 billion. This staggering number includes individual cases involving tens of thousands of dollars – and many others involving hundreds of millions in hard-earned savings and many thousands of victims. Although the defendants in these federal prosecutions used a variety of tactics and schemes, they often took the same approach – guaranteeing high returns and, in many instances, providing falsified investment documents to victims. As a result, those victims lost retirement savings, military survivor benefits, family death settlements, and money set aside for college tuition and mortgage payments.
But I’m pleased to tell you that, since the beginning of last year, approximately 800 defendants have been charged, tried, pled or sentenced in approximately 500 federal prosecutions involving this type of investor fraud. Within just the last year, the Department has obtained a prison sentence of 50 years against an individual who preyed on more than 400 elderly victims in a $40 million Ponzi scheme; as well as a sentence of 10 years against another perpetrator who victimized over 200 seniors and retirees by advertising high returns and then losing their hard-earned money on high-risk investments. And – right here in New Orleans – we secured a sentence of 30 years against the man behind the largest Ponzi scheme in Louisiana history, who used roughly $15 million entrusted to him by more than 160 retirees to build a home for himself, buy jewelry and luxury cars, pay his friends and family, and make private investments of his own.
Now, these are just a few of many examples. And we can all be proud and encouraged by the decisive victories that have been achieved against those who would victimize their fellow citizens for personal gain. But – let me assure you – this is only the beginning.
To build on these successful efforts, earlier this year, the Financial Fraud Enforcement Task Force established two new Working Groups – a Residential Mortgage-Backed Securities Working Group, which brings federal and state partners together to investigate and prosecute abuses in our housing markets; and a Consumer Protection Working Group, which aims to enhance civil and criminal enforcement of consumer fraud.
Both of these groups have hit the ground running – and are helping us to address specific areas of concern in a cohesive, comprehensive way. But I also recognize that building on this record, better understanding the evolving threats we face – and effectively protecting the economic interests of America’s “50 plus” population – is not something that the Justice Department, or any of our law enforcement partners, will be able to do alone.
In the fight against financial fraud, we cannot simply prosecute our way out of this problem. That’s why the Justice Department – in conjunction with U.S. Attorney’s Offices around the nation and our Financial Fraud Enforcement Task Force partners – is reaching out to enlist the support of community members like all of you. We need your help in raising awareness about investor fraud and educating the American people about strategies for protecting themselves – some of which are as simple as reminding potential investors to do their homework before handing over their retirement savings, and to heed the old adage that “if it sounds too good to be true, it probably is.” And we especially need your assistance in encouraging victims and members of the public to report suspected fraud schemes. Of all the shocking statistics I’ve come across, one of the most concerning is the fact that – according to a major AARP study – 3 out of 4 financial fraud victims over the age of 55 are unlikely to report that they’ve been victimized. That rate is significantly higher than any other age group. And we all have a role to play in reversing this trend and making sure that victims know where they can – and why they must – report schemes and suspicious activities.
Such public education efforts are a key area of focus for the Justice Department, and – specifically – for the Consumer Protection Working Group. In fact, just this past March, the Working Group convened a consumer summit that brought together federal and state law enforcement officials, regulators, and consumer advocates in order to discuss strategies, emerging schemes, and methods for advancing our education and outreach efforts – and making certain that these efforts reach America’s seniors and other high-risk groups. A similar meeting was held in June. And the Department’s Consumer Protection Branch – which is part of the Civil Division – has met at least twice with AARP experts to discuss emerging trends in consumer fraud, and to help direct and focus precious resources.
I also want to note that, t oday, in Los Angeles, the local U.S. Attorney will be hosting a Consumer Education Fair to help local residents, including veterans and the elderly, learn how to detect and avoid common scams. And, in the first two weeks of October, local U.S. Attorneys’ Offices, under the auspices of our Financial Fraud Enforcement Task Force, will lead a series of regional Investor Fraud Summits – in Connecticut, California, Colorado, Tennessee, Ohio, and Florida. These summits will provide a unique educational platform – by bringing together U.S. Attorneys, Justice Department prosecutors, representatives from the SEC and other federal agencies, as well as advocates from organizations like AARP and the Better Business Bureau, and – perhaps the best experts of all – investor fraud victims. Additionally, in the coming weeks, the Department will partner with the Certified Financial Planner Board and the Foundation for Public Planning – in an unprecedented event – to offer free financial consulting services to 8,000 victims – many of them seniors – of an investment fraud scheme that was indicted in Chicago.
As we continue this work, I can assure you that today’s Justice Department will never hesitate to move swiftly – and fairly – to enforce our laws and bring those who commit financial fraud crimes to justice; and to help provide Americans with the tools and information they need to protect themselves. Through new resources like the website, www.stopfraud.gov, and with a new level of engagement across government agencies, private industries, and communities, we’re making important strides. But we have more to learn – and much more to do. According to the Administration on Aging, within roughly the next decade and a half, nearly 72 million Americans will be over the age of 65. That’s nearly 20% of the entire population. With this in mind, we must – and we will – continue to be vigilant.
That’s where you – and organizations like AARP – come in. If we are going to achieve the goals we share – and provide all Americans, especially our seniors, with the support they need and deserve, then we must work together like never before – to identify and monitor fraud crimes; to stop them in their tracks by encouraging all Americans to remain vigilant; to educate seniors about the need to approach potential investments with caution; and, most importantly, to help report suspected fraud schemes to the appropriate authorities. As AARP members, each of you has an opportunity – and, I believe, a responsibility – to take advantage of the resources that this organization, in cooperation with our nation’s Justice Department, has made available to you. And we all have an obligation to help spread the word, and share knowledge and expertise, throughout our communities.
With your commitment to this work, and AARP’s continued partnership and engagement, I’m confident that – as we conclude this conference – we stand poised to build upon the momentum we’ve established, and to take our anti-fraud efforts to a new level. I am proud to count each of you as colleagues – and as partners – in this ongoing work. And I look forward to where our joint efforts must – and surely will – take us from here.
====================================================================== Welcome to the United States Department of Justice www.stopfraud.gov/iso/opa/stopfraud/deputy-attorney-general-sally-quillian-yates-delivers-remarks-new-york-university-school.html — captured 2016-03-20 ======================================================================
Remarks as prepared for delivery
Thank you, Professor [Jennifer] Arlen, for that kind introduction and for everything you and your colleagues have accomplished at NYU. In the few years since its launch, the Program on Corporate Compliance and Enforcement has made its mark here in New York and in the legal profession across the country. You have provided a much needed venue to explore both the causes of and potential solutions to corporate misconduct.
It’s an honor to be joined today by so many prominent leaders in the law and the world of corporate compliance, including a number of our federal judges and Department of Justice (DOJ) officials. In particular, I’d like to recognize three of our local U.S. Attorneys: Kelly Currie, from the Eastern District of New York, Paul Fishman, from the District of New Jersey, and Deirdre Daly, from the District of Connecticut, who are with us this afternoon and who have done such great work in the white-collar realm. Let me also thank Dean [Trevor] Morrison and the entire NYU Law community for hosting us here today.
Twenty-six years ago, I started as a line prosecutor in the U.S. Attorney’s office in Atlanta and I’ve been with the Department of Justice ever since. During that time, I’ve had the opportunity to participate in a wide range of cases, from guns and drugs to domestic terrorism and political corruption. But a significant portion of my career has been spent handling white-collar prosecutions. I’ve had a chance to experience them from many angles – first, as an Assistant United States Attorney (AUSA) cutting grand jury subpoenas and interviewing witnesses and later as the Chief of the Fraud and Public Corruption Section in Atlanta, where I oversaw investigations, approved charging decisions and signed off on corporate resolutions. I know first-hand how important and challenging this work is. As U.S. Attorney in Atlanta and now Deputy Attorney General, I’ve had the opportunity to view the world of corporate enforcement through a much wider lens and I have an even greater appreciation for how these efforts affect our economy and fellow citizens. This work has undoubtedly shaped the way I view DOJ’s approach to civil and criminal enforcement.
From these experiences, I’ve learned what many of you know. These cases can present unique challenges for DOJ’s agents and attorneys: there are complex corporate hierarchies, enormous volumes of electronic documents and a variety of legal and practical challenges that can limit access to the evidence we need.
In the most basic ways, though, corporate misconduct isn’t all that different from everything else DOJ investigates and prosecutes. Crime is crime. And it is our obligation at the Justice Department to ensure that we are holding lawbreakers accountable regardless of whether they commit their crimes on the street corner or in the boardroom. In the white-collar context, that means pursuing not just corporate entities, but also the individuals through which these corporations act.
Few people understood this better – or were more committed to ensuring equal justice – than our former Attorney General, Eric Holder. Last September, he spoke forcefully about this very topic here at NYU. In that speech, he discussed the many reasons why individual accountability in corporate cases is so important – because it deters future illegal activity, because it incentivizes changes in corporate behavior and because it ensures that the people who engage in wrongdoing are held responsible for their actions. He made clear that, as a matter of basic fairness, we cannot allow the flesh-and-blood people responsible for misconduct to walk away, while leaving only the company’s employees and shareholders to pay the price. And, as he pointed out, nothing discourages corporate criminal activity like the prospect of people going to prison.
But former Attorney General Holder was also frank about the challenges we face in pursuing financial fraud cases against individuals. In modern corporations, where responsibility is often diffuse, it can be extremely difficult to identify the single person or group of people who possessed the knowledge or criminal intent necessary to establish proof beyond a reasonable doubt. This is particularly true of high-level executives, who are often insulated from the day-to-day activity in which the misconduct occurs. Without an inside cooperating witness, preferably one identified early enough to wear a wire, investigators are left to reconstruct what happened based on a painstaking review of corporate documents, looking for a smoking gun that most financial criminals are far too savvy to leave behind. And since virtually all of these corporations operate worldwide, restrictive foreign data privacy laws and a limited ability to compel the testimony of witnesses abroad make it even more challenging to obtain the necessary evidence to bring individuals to justice.
But regardless of how challenging it may be to make a case against individuals in a corporate fraud case, it’s our responsibility at the Department of Justice to overcome these challenges and do everything we can to develop the evidence and bring these cases. The public expects and demands this accountability. Americans should never believe, even incorrectly, that one’s criminal activity will go unpunished simply because it was committed on behalf of a corporation. We could be doing a bang-up job in every facet of the department’s operations – we could be bringing all the right cases and making all the right decisions. But if the citizens of this country don’t have confidence that the criminal justice system operates fairly and applies equally – regardless of who commits the crime or where it is committed – then we’re in trouble.
This issue has been at the front of my mind since coming to Washington eight months ago. I know the same is true for Attorney General [Loretta E.] Lynch, who cares deeply about it as well. And most importantly, it’s been on the minds of the talented men and women of the Justice Department who do the hard work to make the cases. Over the past months, a group of experienced lawyers from all across the department and the U.S. Attorney community have examined how we approach corporate investigations. They asked themselves: how can we overcome these challenges and maximize our efforts to make the strongest possible cases against individuals in corporate cases? It’s a tall order, but the dedicated men and women of the Justice Department have never been daunted by a difficult task. In fact, throughout the recent working group process, they have demonstrated determination to adapt our practices to evolving demands. In taking on this project, we analyzed our civil and criminal investigations and thought carefully about what we should do within the Justice Department to ensure that individual accountability lies at the heart of our corporate enforcement strategy.
And so, based on this work, we’re taking six specific steps to hold individual corporate wrongdoers accountable. These steps are the subject of a memo that I issued yesterday to all of the department’s prosecutors and civil litigators. I’d like to discuss these six steps with you today. Some are institutional policy shifts that change the way we investigate, charge and resolve cases. Some address the way that DOJ interacts with the targets of an investigation. Some of these policies are new and some are already being practiced at various places within DOJ but now will apply to everyone across the department. Fundamentally, these new policies ensure that all department attorneys – from main justice to the 93 U.S. Attorney’s Offices across the country – are consistent in using our best efforts to hold individual wrongdoers accountable.
To codify and supplement the changes announced in yesterday’s memo, we will be revising several of the guidance documents that our attorneys rely on when investigating corporate misconduct, including the U.S. Attorney’s manual and the principles of federal prosecution of business organizations, sometimes known as the Filip Factors.
The first change relates to one of those Filip Factors. Effective immediately, we have revised our policy guidance to require that if a company wants any credit for cooperation, any credit at all, it must identify all individuals involved in the wrongdoing, regardless of their position, status or seniority in the company and provide all relevant facts about their misconduct. It’s all or nothing. No more picking and choosing what gets disclosed. No more partial credit for cooperation that doesn’t include information about individuals.
Now, to the average guy on the street, this might not sound like a big deal. But those of you active in the white-collar area will recognize it as a substantial shift from our prior practice. While we have long emphasized the importance of identifying culpable individuals, until now, companies could cooperate with the government by voluntarily disclosing improper corporate practices, but then stop short of identifying who engaged in the wrongdoing and what exactly they did. While the companies weren't entitled to full credit for cooperation, they could still get credit for what they did do and that credit could be enough to avoid indictment.
The rules have just changed. Effective today, if a company wants any consideration for its cooperation, it must give up the individuals, no matter where they sit within the company. And we’re not going to let corporations plead ignorance. If they don’t know who is responsible, they will need to find out. If they want any cooperation credit, they will need to investigate and identify the responsible parties, then provide all non-privileged evidence implicating those individuals.
While this is new for the corporate world, there’s nothing radical about the concept. It's the same rule we apply to cooperators in any other type of criminal investigation. A drug trafficker can decide to flip against his co-conspirators. He can proffer to the government the full scope of the criminal scheme. He can take the stand for the government and testify against a dozen street-level dealers. But if he has information about the cartel boss and declines to share it, we rip up his cooperation agreement and he serves his full sentence. The same is true here. A corporation should get no special treatment as a cooperator simply because the crimes took place behind a desk.
This position builds on the tremendous work advanced by Leslie Caldwell, our Assistant Attorney General for the Criminal Division, since she returned to DOJ last year. Leslie and the Criminal Division have been demonstrating that corporate cooperation can and must focus on individual accountability, and our new policy guidance now makes that crystal clear.
This threshold requirement of complete cooperation as to individuals not only governs criminal investigations, but applies to civil investigations as well. Companies will be expected to provide the same type of information about individuals if they want any consideration on the civil side, including how a case is charged or resolved and whether we bring action against a parent or its subsidiary. Similarly, it will be the department’s position going forward that in order to qualify for the reduced damages provision under the False Claims Act, the company must identify any culpable individuals and provide all material facts about those individuals.
This new cooperation requirement does not mean that DOJ will sit back and wait for the company to deliver the information about individual wrongdoers and then merely accept what companies provide. To the contrary, department attorneys will be actively investigating individuals at every step of the process – before, during and after any corporate cooperation. Department attorneys will be vigorously testing information provided by companies and comparing it to the results of our own investigation to ensure that it is indeed complete and that it doesn’t seek to minimize the role of any one person or group of individuals.
Building on this point, a company should not assume that its cooperation ends as soon as it settles its case with the government. Going forward, corporate plea agreements and settlement agreements will include a provision that requires the companies to continue providing relevant information to the government about any individuals implicated in the wrongdoing. A company’s failure to continue cooperating against individuals will be considered a material breach of the agreement and grounds for revocation or stipulated penalties.
And one final note on this point. The purpose of this policy is to better identify responsible individuals, not to burden corporations with longer or more expensive internal investigations than necessary. We are not asking companies to “boil the ocean,” so to speak, and embark upon a multimillion-dollar investigation every time they learn about misconduct. We expect thorough investigations tailored to the scope of the wrongdoing. So for all the defense lawyers in the room – and I know there are plenty of you – keep this in mind. If you are representing a corporation and there’s a question about the scope of what’s required, you can do what many defense attorneys do now – pick up the phone and discuss it with the prosecutor.
As part of this broader policy shift, we're not just changing what we expect of companies; we're also changing what we expect of ourselves. The second policy I want to discuss involves how we initiate and develop corporate investigations. One of the things we have learned from experience is that it is extremely difficult to build a case against individuals, civil or criminal, unless we focus on individuals from the very beginning. For example, if an investigation starts as a civil inquiry into the company and interviews are conducted and documents gathered with a focus on corporate liability, it is often challenging for our attorneys to then go back at the conclusion of the civil matter and build a criminal case against individuals. This is particularly true not only because of the sheer passage of time, but also because individual criminal liability often hinges on proving a level of criminal intent much more demanding than what was required in the civil case.
To address this problem, the department yesterday instructed its attorneys that, going forward, they are to focus on individuals from the start of an investigation, regardless of whether the investigation begins civilly or criminally. Moreover, once a case is underway, the inquiry into individual misconduct can and should proceed in tandem with the broader corporate investigation. Delays in the corporate case will no longer suffice as a reason to delay pursuit of the individuals involved.
The third policy dovetails with the second. The best way to ensure that criminal prosecutors don’t need to go back and build a new case after the civil attorneys finish their inquiry – or vice versa – is to make sure that everyone’s talking to each other from the very beginning. And so we are directing our civil and criminal attorneys to collaborate to the full extent permitted by law at all stages of the investigation. The Department of Justice has access to a wide range of enforcement remedies – from civil penalties to lengthy prison sentences – and the only way to leverage our full authority is by ensuring early and regular communication. To make sure nothing slips through the cracks, we’re formalizing these lines of communication. Going forward, regardless of whether a corporate case begins as a civil or criminal inquiry, the DOJ attorneys initially handling the matter will be responsible for notifying the “other side of the house” about the investigation. As the case proceeds, civil and criminal attorneys will be in regular contact. If prosecutors decide not to bring criminal charges against individuals, they will need to notify their civil counterparts, who can make an independent assessment of civil liability. And if civil attorneys identify individuals during their investigation who should be subject to a criminal inquiry, they will be expected to promptly refer the matter to criminal prosecutors, regardless of the current status of the civil corporate investigation.
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