Part III: Starved for Justice
September 15th will mark the seventh anniversary of Wall Street giant Lehman Brothers going into bankruptcy, which precipitated the Great Recession that lingers on today - it remains the largest bankruptcy in U.S. history. To date, no executives have faced prosecution for the widespread mortgage fraud that fueled the bubble. People around the world crave justice.
William K. Black, now a professor of law at the University of Missouri at Kansas City, is a former bank regulator who played an integral role in throwing a number of high-level executives in jail for white-collar crimes during the savings and loan crisis in the 1980s. In an interview with Moyers and Company, Mr. Black stated...
"The savings and loan debacle was one-seventieth the size of the current crisis, both in terms of losses and the amount of fraud. In that crisis, the savings and loan regulators made over 30,000 criminal referrals, and this produced over 1,000 felony convictions in cases designated as "major" by the Department of Justice. But even that understates the degree of prioritization, because we, the regulators, worked very closely with the FBI and the Justice Department to create a list of the top 100 -- the 100 worst fraud schemes. They involved roughly 300 savings and loans and 600 individuals, and virtually all of those people were prosecuted. We had a 90 percent conviction rate, which is the greatest success against elite white-collar crime (in terms of prosecution) in history.
In the current crisis, that same agency, the Office of Thrift Supervision, which was supposed to regulate, among others, Countrywide, Washington Mutual and IndyMac -- which collectively made hundreds of thousands of fraudulent mortgage loans -- made zero criminal referrals. The Office of the Comptroller of the Currency, which is supposed to regulate the largest national banks, made zero criminal referrals. The Federal Reserve appears to have made zero criminal referrals; it made three about discrimination. And the FDIC was smart enough to refuse to answer the question, but nobody thinks they made any material number of criminal referrals [either]."
Instead of prosecuting those responsible for fraud, market manipulation and insider trading on a massive scale, the Obama administration has instead prosecuted or otherwise retaliated against those whistleblowers brave enough to expose them. "So at the peak of the savings and loans crisis -- again, one-seventieth the size of this crisis -- of those 2,300 total FBI agents, 1,000 of them were working on just one industry, the savings and loan industry, to produce that incredible wave of success that we had, says Mr. Black. As recently as fiscal year 2007, there were only 120 FBI agents assigned to mortgage fraud, and that's despite the fact that the FBI itself, in September 2004, warned that there was an epidemic of mortgage fraud -- 'epidemic' was their word -- and predicted that it would cause a financial crisis -- 'crisis' was their word -- unless it was stopped."
Is America still distinguished by the "Rule of Law" or by the absence of it? The reversal of my overwhelming jury verdict answers the question conclusively. In my absence, with no court reporter and no new evidence, my jury verdict (called "overwhelming" by the trial judge) was reversed twenty-six months later in a move that simply ignored local, state and federal law. I would offer that with the wink and a nod to collusion by all these once-trusted institutions, the little-guy doesn't have a chance at beating these "too-big-to-fail" banks. Not a chance, no matter how weak the bank's case or how strong the "whistleblower's" case." The powers that be are creating a culture that allows criminality, blurs transparency, ignores Federal, State and Constitutional laws and guarantees a lawless "wild-west" environment in which to operate.
Perjury, witness tampering and obstruction of justice go unpunished as do securities fraud, insider trading and market manipulation. Instead, good behavior is punished while corruption is rewarded. How is this possible in this country? The institutions set up to protect us and punish wrongdoers have, instead, protected wrongdoers and punished us. The world is waiting for the corrupt, malfeasant CEOs who contributed to the global recession to be punished. Until this happens, both the health of the markets and the integrity of the U.S. judicial system remain in question. AG Lynch, this is a golden opportunity to work, as you just said, for the protection of both the needs of victims and the rights of all.
Michael G. Winston
Former Enterprise Chief Leadership Officer, Countrywide Financial Corporation
...and Countrywide Whistleblower