Feds Set Sights on 'Gatekeepers' in Fraud Investigations

Federal law enforcement officials said today they are targeting lawyers, mortgage brokers, real estate brokers, and other “gatekeepers” who perpetrated fraud that contributed to the current economic crisis -- a clear warning shot as the federal government is pumping billions of dollars into the financial sector.

“They have the most to lose, they’re the most likely to flip, and they make they make the best examples,” said Neil Barofsky, the special inspector general for the Troubled Assets Relief Program, during a congressional hearing on fraud enforcement.

Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) was even more blunt: “I want to see people prosecuted,” he said. “Frankly, I want to see them go to jail."

(Note: We originally -- and incorrectly -- attributed the above quote to Rita Glavin, acting head of the Justice Department's Criminal Division. The BLT regrets the error.)

The hearing was meant to underscore the need for more law enforcement resources amid an upsurge in mortgage and corporate fraud investigations. Leahy and Sen. Charles Grassley (R-Iowa), have introduced a bill that would expand the scope of federal fraud laws and provide funding for more prosecutors and investigators.

FBI Deputy Director John Pistole told the committee that mortgage fraud investigations nearly doubled in the last two years to more than 1,600 in 2008. The bureau, he said, has more than 530 corporate fraud investigations open, including 38 directly related to the current financial crisis. Pistole said he could see that number potentially rising into the hundreds.

But federal law enforcers could do much more with additional resources, he said, pointing to the Justice Department's successes in the wake of the savings-and-loan crisis of the 1980s. At the time, 1,000 agents and forensic investigators and dozens of federal prosecutors were devoted to the effort, which produced more than 600 convictions and $130 million in restitution.

Compared to the $160 million lost during the S&L crisis, the current situation is far direr, with financial institutions globally reducing their assets by more than $1 trillion. But the Justice Department’s focus on national security has diminished the fraud ranks. Pistole said 240 agents, supplemented by investigators from other agencies, are working on fraud cases stemming from the economic crisis.

Rita Glavin, acting head of the Justice Department's Criminal Division, said the department was in discussions with Barofsky about how best to handle criminal referrals and prosecutions when his office uncovers wrongdoing. She also said the Justice Department’s fraud section had created a mortgage fraud working group, with a collection of other enforcement agencies.

Sen. Sheldon Whitehouse (D-R.I) asked Glavin whether DOJ had any designs for a nationwide mortgage fraud taskforce. Then-Attorney General Michael Mukasey repeatedly rejected the idea, saying individual U.S. attorney’s offices were better equipped to handle the work. Glavin said the department was studying the issue. “No decision has been made with respect to that,” she said.

Comments

[Laser]

The apathy and willful blindness of the Federal authorities to Elite League White Collar Fraud (Fraud Masters) has gone right off the deep end, past apathy to arbitrary & capricious applications of Color of Law and Breach of Fiduciary duty - that borders on the realm of complicity.
.
As in Madoff, we reported on Petters, Traub and Dreier for years.
We caught Traub red handed in supplication of intentionally false affidavits and deceiving the Court (Traub was a partner with both Petters and Dreier)

.
The SEC Bankruptcy Fraud Division in Atlanta was sending an Official Intergovernmental letter recommending an Official Investigation (under 18 USC 3057(a))

Not only did that not transpire - when the case went UP the authority chain, Traub's firm was given UNlawful, implied, blanket, immunity by the DOJ US Trustee's office - who also granted Traub the promise of future willful blindness.
.
Then we found out that the DE US Attorney was a partner with the other law firm that confessed to false affidavits.
.
Just so happens that firm had a former partner who was the US Attorney.

The Director of the EOUST resigned when we discovered another $100 million in fraud after the Unlawful immunity.

Then the Central CA US Attorney shut down the Public Corruption Unit and threatened career prosecutors with retaliation if they spoke to the Press about why.

www.petters-fraud.com

We will know that the country is returning to the Rule of Law when the case is investigated properly

Prosecutions are a slam dunk

Failing to prosecute resulted in no mitigation of Dreier and Petters who are the number 2 and 3 largest Ponzi schemers of all time!

[Jeff Spangler]

I suspect that the scope of aider-and-abettor exposure is so vast that only a small percentage of the clearest cases will ever see a courtroom, thus emphasizing the importance of triaging the most egregious violators at the highest levels. I'm not holding my breath.