“You need a massive prosecutorial effort. I don’t see evidence that it’s happening. If we were talking baseball, it would be at the AAA level.”

-Solomon Wisenberg, former federal prosecutor.


During George W. Bush’s reign of error, the Justice Department looked the other way at all manner of fraud, but most especially Securities fraud on Wall Street. During his presidency, it plummeted 87%.  Other forms of fraud prosecutions also fell. My working assumption was this was specific to W and his unique brand of incompetency.

As it turns out, that was the wrong assessment. After two years in office, President Barrack Obama is no better when it comes to “corporate, securities and bank fraud” than his hapless predecessor:

“Prosecutions of three categories of crime that could be linked to the causes of the crisis — corporate, securities and bank fraud — declined last fiscal year [2010] by 39 percent from 2003, the period after the accounting scandals at Enron Corp. and WorldCom Inc., Justice Department records show.”

Which raises the question: Why has the USAG dropped the ball ?

Some of it involves staffing — after 9/11, many FBI agents were reassigned to anti-terror work. But that should be under a different budget, and if this was a priority, the head of the Justice department should be clamoring for more fraud investigators and those who have forensic skills.

But 9/11 is a lame excuse for a dearth of successful fraud prosecutions a decade later.

I see three big bottlenecks for Fraud prosecutions:

1) Failure to attack the problem as a systemic issue: If it were up to me, I would be using RICO statutes to attack origination fraud and foreclosure fraud.

2) Conflict of interests: Uncle Sam still has huge stakes in banks and insurers. That reduces the incentives to find wrongdoing (thereby hurting your taxpayer funded portfolio)

3) Lobbying/Campaign donations from financials: Congress remains a wholly owned subsidiary of Wall Street. Despite rules prohibiting it, there has been increased pressure on DOJ to not bring actions by Congress-critters.

Thus,we have seen little motion from DOJ against the banksters.

I continue to hold the position that the best hope for obtaining any form of post-crisis Justice will come from the State AGs . . .


Security Fraud Prosecutions Down 87% Since 2000 (December 25th, 2008)

Prosecutors Faulted on Failure to Charge ‘Bandits’ in U.S. Market Collapse
Justin Blum
Bloomberg, May 23, 2011

Category: Bailouts, Legal

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

24 Responses to “Bush/Obama Fraud Prosecutions Down 39% Since 2003”

  1. Donald says:

    The Bank of Scotland got a slap on the wrist. I guess the British are a little more brave.http://www.bbc.co.uk/news/business-13541860

  2. Petey Wheatstraw says:

    The rule of law ended along with the Republic and its “quaint” Constitution. Meet the New Boss. Not the same as the Old Boss.

  3. rktbrkr says:

    I’d love to see a year by year chart just to see if we’re talking apples to apples with Bush down 87% and O’B down 39%

    But really, if the US government won’t even regulate these banksters how can you ever expect criminal prosecution? The community bankers yes, they are being prosecuted but they don’t present systemic risk – if you know what I mean

  4. rktbrkr says:

    O’B has been Bush’s third term for banking & finance, he reappointed Ben Shalom and picked Paulson’s acolyte Timmy – it has been continuity we can’t believe in.

    More of the same in store, a relabled QEIII and time to revisit the TBTF mortgage crisis.

  5. Petey Wheatstraw says:

    The corporatists frame the issues and manage the government accordingly. Criminality within their ranks is not an issue. Move along.

  6. PrahaPartizan says:

    This headline wouldn’t be so disturbing if it weren’t for the circus ramping up to cover the DoJ prosecution of John Edwards for mishandling campaign funds at the same time. Fer chris’sake, Edwards is no longer engaged in politics and his political career is dead. We’re going to waste money pursuing an interred political career while allowing active criminals to continue their thieving ways. We need more change we can believe in (and, yes, I did volunteer for the campaign and voted for him too).

  7. Kort says:

    Obama has been a dreadful combo of Jimmy Carter’s 2nd term mixed with GWBush’s 3rd term.

    Change you can deceive in.

  8. FS says:

    Well done and Kort has hit it right—this administration has become mind numbingly stupid. I would ask you to reconsider on using RICO—-I think limiting RICO rather than expanding it would be wise. One of the reasons
    we seem to be tipping over is good ideas become government programs become monstrous overreaches.

  9. DeDude says:

    This data is sloppy. What exactly does it mean that we had a decline of 39% from 2003 to 2010 vs a decline of 87% during the last Bush rein of deliberate error. My understanding is that prosecutions increased in the first two years until they finally got the message through to lower levels that this type of crime should not be investigated. This presentation is hiding the facts and not allowing a real apples to apples comparison. Give us a graph of the actual numbers from say 1998 to now so there is at least some idea of what direction things have moved and when. Obama has at least put more manpower onto these investigations, so that should give the agencies a chance to increase their productivity. Lets have a graph of number of people dedicated to these cases during the same period.

    The other critical issue is changes in the law and or levels of evidence needed to get a conviction. If all of the things that people used to be convicted for in the Clinton era, now have become legal or has an impossible standard of prof, then the lack of convictions may not be for a lack of effort.

  10. joro says:

    The DOJ is too busy spending 5 years+ investigating and shutting down online poker sites to bother with Wall Street.

  11. VennData says:

    Well, when you get these wild-eyed “law enforcement” types going after innocents, like reclusive billionaire Mark Cuban, you know these lazy – albeit, admittedly, aggressive – government bureaucrats need to get a lesson in good old American freedom.

  12. louiswi says:

    So Barry,

    I’m thinking you might get interested in this idea. How about developing a “Shadow Justice” website. An ancillary to this site. Allegations and charges be listed, with a resultant sentence for the offender. I’m thinking hanging in the style of the frontier day horsethief would be an ultimate appropriate sentence for the most offensive offenders.

    Think of the headlines. “Shadow Justice” today announced the hanging today of -fill in the blank- for specific criminal acts -fill in the blanks-against society.

  13. franklin411 says:

    OT: RIP Mark Haines =(

  14. JimInMissoula says:

    Say what you want about Spitzer, but at least he had a few of these clowns frog-marched out of their offices. At the time, as a very distant/casual observer, I wondered why the hell the NYAG was doing the Fed’s work. Pretty pathetic that with all the malfeasance over the past decade that we’ve seen very few of the perps in the docket.

  15. Fred C Dobbs says:

    Good Question, and a variance on the ancient question: ‘who will guard the Guardians?’ And the answer to that question is: NOT THE GUARDIANS. A few points: What have former US Attorneys (there are hundreds) have to say about prosecuting ‘White Collar Crime’? What was their experience? Was their budget big enough to devote the considerable man-power needed to prosecute? What was their success rate? Is the subject matter just too difficult for the prosecutors to handle or the juries to understand? Are the legal standards so weak and indefinite that the criminals can fly an Airbus right through it? Are the judges supportive? Sometimes we can find explanations in the way things work, and accept disappointment. For example, many want to retreat from Iraq because a few are killed in war, but most are indifferent to the thousands that die from driver negligence, medical malpractice, self-administered drugs etc. etc. etc.

  16. JimInMissoula says:

    …should read “the Feds’ work ” (plural – not the Federal Reserve)

  17. jj2me says:

    #2, Conflicts of interest, seems compelling: do you want to destroy the bank with your money in it, or wait until you withdraw it? And what about conflicts due to whatever personal bargains were made between the heads of banking and the administration in the last three years, like, “Agree to this and I won’t go after you.”

    Also, how much of the lack of prosecution is due to the fragile recovery, and the perceived negative impacts if prosecutions were pursued?

  18. plantseeds says:

    If Angelo Mozilo isn’t going to prison then anyone with lesser involvement probably shouldn’t be going either.

    Mozilo agreed to pay $67.5 million in fines and accepted a lifetime ban from serving as an officer or director of any public company.

    This fine represents a small fraction of Mozilo’s estimated net worth of $600 million. Countrywide will pay $20 million of the $67.5 million penalty because of an indemnification agreement that was part of Mozillo’s employment contract.

    “Mozilo’s record penalty is the fitting outcome for a corporate executive who deliberately disregarded his duties to investors by concealing what he saw from inside the executive suite.” -Robert Khuzami, director of the SEC’s Division of Enforcement

    The terms of the settlement allow Mr. Mozilo to avoid acknowledging any wrongdoing.

    In February 2011, the U.S. dropped its criminal investigation into the facts behind that civil settlement.

  19. ottnott says:

    I’m all for crowdsourcing the initial detection of fraud. This move by the SEC is a good one, provided they follow through: http://finance.yahoo.com/news/New-rules-offer-big-cash-apf-2295160939.html?x=0
    “Whistleblowers who report corporate fraud or other misconduct to the government could receive sizable cash awards under new rules adopted Wednesday by federal regulators.

    Tipsters would be eligible if they give the Securities and Exchange Commission information that leads to an enforcement action resulting in more than $1 million in penalties. The SEC would pay up to 30 percent of the money it recovers from a company or person.

    A divided SEC voted 3-2 to adopt the new whistleblower program. The two Republican commissioners objected.

    The program was mandated by the financial overhaul law enacted last year. It was contested by big U.S. companies.”

    I think they have set the bar for receiving payments too high, though. It would be good to have some modest payments for intermediate milestones between the initial contact with the SEC and the final assessment of penalties. Also, set up some lower payment rates for lower penalty amounts. In the long term, it would be good to nail fraudsters and their companies in the early stages of growth.

  20. NeutralObserver says:

    Bill Black cleaned up the S&L mess (Litigation Director of Fed Home Loan Bank Board) and reregulated the S&L industry during the Reagan years. Over 1000 felony bank fraud convictions until Clinton shut it down. Black says that there is/was not a staffing problem at the FBI, rather Bush and now Obama administrations refused to prosecute bankster fraud. So the FBI stopped those investigations and instead went after insider trading cases. The only bank fraud cases they would invetigate were those where another banker claimed that they had been defrauded, usually by a smaller bankster, so all the prosecutions were of small banks… verifying for some that there was not a TBTF systemic large banking fraud problem. Black explains the whole corruption story of the banking industry on Harry Shearer’s show (Yves Smith was on a about two months ago). Listen or download here:

  21. foghornleghorn says:

    Looking at the data from the DOJ website does not seem to confirm this story.
    FY 2000-2001 convictions from the Fraud Division were 112 for 2 years or 56 per year. This would have been essentially the last 2 years of the Clinton Administration with a slight overlap with Bush (earlier data not available). The last 2 years of the Bush Administration, FY 2007 and FY 2008 had 155 and 156 convictions.


    BR: The data referenced in the Bloomberg article is not about Convictions — it is about Prosecutions.

    In NBA terms, its shots taken versus shots made.

  22. foghornleghorn says:

    My bad.
    The only other numbers on the DOJ website are for indictments.
    FY 2000-2001 a 2 year total of 119 or 6o a year. FY 2007, 2008 indictments of 215 and 160 respectively. So to continue with your sports analogy: more shots on goal and more pucks in the net (which is all that really counts isn’t it?).

  23. openwheel11 says:

    I am not really sure where the article got its facts from but there are statistics at the DOJ Fraud division for those willing to spend 5 minutes on a web search. The statistics tend to move around a bit and there are categories reported in some years that are not reported in others. Since the one common reported statisitic and the most important is convictions lets focus on that. For FY 2000-2001 (effctively before Bush ) total convictons 112 (they don’t break it out by year) For the following FY’s 2002-2008 (no statistics for the Obama years on the website) 77, 100 ,83, 80, 62, 155, 156. By my math that is a tripling of convictions from the pre-Bush years to his final years. Doesn’t seem to fit the naritive… Just the facts Bitchez…


    BR: Do you understand the difference between Prosecutions and Convictions? At Bats versus Hits?

    The title of this post is ” Bush/Obama Fraud Prosecutions Down 39% Since 2003″

  24. NailEmNow says:

    I agree. Praise the Lord and pass the prosecutions. But as has been pointed out prosecutions have been attempted but we all know that some are getting a pass with a little help from their friends. The courts
    are infested with judges without inclination to do justice–we could all speculate as to why.

    First, you have to scrutinize and sanitize the benches, do whatever is necessary then Rico the DirtBags.

    All of this didn’t start overnight, it took a while for the corruption to spread as thick as it is now. WE let it happen, we failed to be on the watchtower. Now, strong medicine is required to clean house. Either we’re up to it or we will go down in history as the stupidest, laziest, most foolish beings in history. Talk is cheap–dumbasses weep.