November 19, 2012
I was discussing Prosecutorial Abdication with a friend who used to work in a prosecutorial office. While she agreed with what Brad and I had written, she also highlighted the technical and training challenges that prosecutors face in putting together an effective investigation.
Where an insider trading or corporate fraud case might be very difficult and involve tens of thousands of emails, it usually only involves a few key people. As a result, it is easier to get a handle on the case. In contrast, she noted, a securities fraud case based on even a single mortgage-backed security involves thousands of mortgages originated by many different lenders. Numerous different hands touch those files at origination as well as during the securitization process. On top of that, many of the key documents are missing or at least their chain of custody is uncertain.
The net result, according to her, is that building such a case can be exponentially harder than building an insider trading case. This is particularly true because many prosecutor offices will not have the sophisticated software (Excel is not enough!) to track all of the relevant data nor the training (forensic accounting skills would be nice) to do an effective job. Let’s see what the Financial Fraud Enforcement Task Force can do with the resources made available to it . . ..| Permalink