{"id":16250,"date":"2011-12-12T12:00:52","date_gmt":"2011-12-12T12:00:52","guid":{"rendered":"http:\/\/www.transcend.org\/tms\/?p=16250"},"modified":"2011-12-09T01:01:02","modified_gmt":"2011-12-09T01:01:02","slug":"why-no-financial-crisis-prosecutions-ex-justice-official-says-it%e2%80%99s-just-too-hard","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2011\/12\/why-no-financial-crisis-prosecutions-ex-justice-official-says-it%e2%80%99s-just-too-hard\/","title":{"rendered":"Why No Financial Crisis Prosecutions? Ex-Justice Official Says It\u2019s Just too Hard"},"content":{"rendered":"

It\u2019s an issue we and others<\/a>\u00a0have noted again<\/a> and again<\/a>: Years after the financial crisis, there have still been no prosecutions of top executives at the major players in the financial crisis<\/a>.<\/p>\n

Why\u2019s that? Well, according to a now-departed Justice Department official who used to be in charge of investigating such matters, the Justice Department has decided that holding top Wall Street executives criminally accountable is too difficult a task<\/a>.<\/p>\n

David Cardona, who recently left the FBI for a job at the Securities and Exchange Commission, told the Wall Street Journal that bringing financial wrongdoing to account is \u201cbetter left to regulators,\u201d who can bring civil cases. Civil cases, of course, can produce penalties from the banks — as well as promises to be on better behavior<\/a> — but don\u2019t put any executives behind bars. Here\u2019s the Journal:<\/p>\n

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

Cardona told the Journal that the failed first attempt<\/a> to charge financial players with crisis-related fraud — the 2009 trial and eventual acquittal of two Bear Stearns Cos. hedge-fund managers — triggered “a lot of rethinking on how we do things.\u201d After that, he said, the federal government began to question its \u201cability to convince a jury that criminality has occurred\u201d on complex and technical financial cases.<\/p>\n

The lack of prosecutions was also raised in a \u201860 Minutes\u2019 piece Sunday<\/a> about large-scale mortgage fraud during the bubble. Assistant Attorney General Lanny Breuer told CBS that the Justice Department had not lost confidence and was \u201cbringing every case that we believe can be made.\u201d<\/p>\n

\u201cI get it. I find the excessive risk taking to be offensive,\u201d said Breuer. \u201cI may personally share the same frustration that American people all over the country are feeling, that in and of itself doesn\u2019t mean we bring a criminal case.\u201d<\/p>\n

However, one question raised by the 60 Minutes segment is why the Justice Department isn\u2019t building criminal cases against companies for violating Sarbanes-Oxley — a landmark corporate reform law enacted after Enron. From the transcript<\/a>:<\/p>\n

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

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

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

Kroft: And this law has not been used at all in the financial crisis.<\/p>\n

Partnoy: It hasn’t been used to go after Wall Street. It hasn’t been used for these kinds of cases at all.<\/p>\n

Kroft: Why not?<\/p>\n

Partnoy: I don’t know.<\/p>\n

As Cardona — the former Justice official — sees it, financial regulators have been doing a \u201cfine job\u201d building civil cases against big firms.<\/p>\n

That might come as a surprise to U.S. District Judge Jed Rakoff, who\u2019s repeatedly rebuked the SEC for striking relatively small agreements to settle civil charges against financial firms.<\/p>\n

As we noted last week, Rakoff tore into a recent $285 million settlement with Citigroup, calling the financial penalty \u201cpocket change<\/a>\u201d for Citi and blasting the SEC\u2019s longstanding practice of allowing firms to settle without admitting wrongdoing.<\/p>\n

Go to Original \u2013 propublica.org<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

It\u2019s an issue we and others have noted again and again: Years after the financial crisis, there have still been no prosecutions of top executives at the major players in the financial crisis. Why\u2019s that? Well, according to a now-departed Justice Department official who used to be in charge of investigating such matters, the Justice Department has decided that holding top Wall Street executives criminally accountable is too difficult a task.<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[139],"tags":[],"class_list":["post-16250","post","type-post","status-publish","format-standard","hentry","category-justice"],"_links":{"self":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/16250","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/comments?post=16250"}],"version-history":[{"count":0,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/16250\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media?parent=16250"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/categories?post=16250"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/tags?post=16250"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}