- Building investors sue Waterbridge Capital LLC for $10 million for allegedly selling units and pocketing profits, refusing to pay back its investors.
- Hurricane Sandy $25 million contract-insurance suit is dismissed against one of the defendants, Arch Insurance Group and its subsidiary, because the underlying policy limits hadn’t been reached and thus Arch did not have any liability.
- In $189 million mortgage fraud suit, the federal government claims that Wells Fargo cannot access documents it withheld because “the release of some documents doesn’t waive protects for all of them.”
- The Federal Deposit Insurance Corp. sues US Bank and Citigroup, Inc. for allegedly failing as trustee of residential mortgage-backed securities leading to a $695 million loss to the insurance fund.
Tag Archives: Mortgage Fraud
TARP’s Smallish Rogues Gallery
The Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) issued its Quarterly Report to Congress on July 30, 2014. There is a lot to digest in this 500+ page document, but I thought that readers of this blog might be interested in the rogues gallery found at Figure 1.3 on pages 54-56 (note that this is the pagination found in the document, which is different from the pdf’s pagination of the document). Figure 1.3 lists the 85 people sentenced to prison as a result of a SIGTARP investigation, the sentences they received, and their affiliations:
Many of the criminal schemes uncovered by SIGTARP had been ongoing for years, and involved millions of dollars and complicated conspiracies with multiple co-conspirators. On average, as a result of SIGTARP investigations, criminals convicted of crimes related to TARP’s banking programs have been sentenced to serve 77 months in prison. Criminals convicted for mortgage modification fraud schemes or other mortgage fraud related investigations by SIGTARP were sentenced to serve an average of 39 months in prison. Criminals investigated by SIGTARP and convicted of investment schemes such as Ponzi schemes and sales of fake TARP-backed securities were sentenced to serve an average of 88 months in prison. (53-54)
Hard to tell if that is many or only a few people being held accountable. But it is interesting to note that restitution and forfeiture from crimes related to TARP have so far “resulted in more than $5.11 billion in court orders for the return of money to victims or the Government.” (59) That comes out to roughly $60 million for each of the 85 prisoners and about $800,000 for each of the 77 months each of them was sentenced (on average) to prison. While these metrics are merely impressionistic, they certainly make me wonder if this report is right to being touting SIGTARP as an agent of accountability so much.
No Justice for Mortgage Fraud
The Audit Division of the Department of Justice’s Office of the Inspector General has issued an Audit of the Department of Justice’s Efforts to Address Mortgage Fraud. One word for it — DEPRESSING:
The Department’s inability to accurately collect data about its mortgage fraud efforts was starkly demonstrated when we sought to review the Distressed Homeowner Initiative. On October 9, 2012, the FFETF [Financial Fraud Enforcement Task Force] held a press conference to publicize the results of the initiative. During this press conference, the Attorney General announced that the initiative resulted in 530 criminal defendants being charged, including 172 executives, in 285 criminal indictments or informations filed in federal courts throughout the United States during the previous 12 months. The Attorney General also announced that 110 federal civil cases were filed against over 150 defendants for losses totaling at least $37 million, and involving more than 15,000 victims. According to statements made at the press conference, these cases involved more than 73,000 homeowner victims and total losses estimated at more than $1 billion.
Shortly after this press conference, we requested documentation that supported the statistics presented. In November 2012, in response to our request, DOJ officials informed us that shortly after the press conference concluded they became concerned with the accuracy of the statistics. Based on a review of the case list that was the basis for the figures, the then-Executive Director of the FFETF told us that numerous significant errors and inaccuracies existed with the information. For example, multiple cases were included in the reported statistics that were not distressed homeowner-related fraud. Also, a significant number of the included cases were brought prior to the FY 2012 timeframe. (ii, footnote omitted)
According to the report, this was not a one time problem with the DoJ’s reporting about mortgage fraud.
The audit “makes 7 recommendations to help DoJ improve its understanding, coordination, and reporting of its efforts to address mortgage fraud.” (iii) The last two seem to be the most important:
6. Develop a method to capture additional data that will allow DOJ to better understand the results of its efforts in investigating and prosecuting mortgage fraud and to identify the position of mortgage fraud defendants within an organization.
7. Develop a method to readily identify mortgage fraud criminal and civil enforcement efforts for reporting purposes. (30)
I (along with Brad Borden) have previously argued that law enforcement agencies have not been tough enough on high-level perpetrators of mortgage fraud, although our position appears to be the minority view among lawyers (see here for a more common view). I think this audit supports our view that, for one reason or another, prosecutors have dropped the ball on this in a big way. It’s probably too late to do anything about the last financial crisis, but it sure would be swell to have a system of accountability put in place for the next one!
