Time Is Running Out To File Suits Over 2008 Crisis
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The Justice Department filed a $1 billion mortgage fraud case this week against Bank of America. To be clear, it is a civil case; the only thing at stake is money.
And as NPR's Carrie Johnson reports, this may be the most accountability tax payers ever see from the 2008 financial crisis. That's because the statute of limitations to bring a criminal case is expiring, and no major Wall Street bank executive has been convicted of a crime.
CARRIE JOHNSON, BYLINE: Remember the biggest names from the economic meltdown of 2008? Countrywide, New Century Financial, Washington Mutual, Lehman Brothers. The Justice Department investigated, but authorities came away with no criminal convictions. And that leaves Jeff Connaughton, a former Democratic Senate staffer, with a question.
JEFF CONNAUGHTON: Did the department ever organize a timely, purposeful, concerted investigation of Wall Street executives? And the answer is no.
JOHNSON: Connaughton says he thinks the Obama administration put economic recovery above the need to hold people accountable in the criminal justice system. In a new book, Connaughton writes about how he encouraged the Justice Department to create strike forces to look for lying and cheating, company by company.
CONNAUGHTON: You need to target some of these senior bank executives like they're drug kingpins and target their junior employees, get them to flip, to give evidence. I mean, that sort of aggressive approach might have produced cases.
JOHNSON: Almost every time he's asked about the issue, Attorney General Eric Holder points out that risk-taking and greed don't amount to crimes, especially when some of the risks were disclosed in fine print before companies went bust. Holder described his efforts this way to the House Judiciary Committee in June.
ERIC HOLDER: Since the start of this administration, the Justice Department has signaled an unwavering commitment to preventing and combating a wide range of financial and health care fraud crimes. We have taken bold steps to address the contributing factors and consequences of the recent economic crisis.
JOHNSON: Like a $25 billion settlement the department reached with five of the country's largest mortgage servicers, a deal that Holder calls...
HOLDER: The largest joint federal-state settlement in the history of the United States of America.
JOHNSON: But consumer advocates say the best way to prevent fraud in the future is to send executives to prison now. Federal prosecutors tried that back in November, 2009. But a jury voted to clear two Bear Stearns managers of lying to investors. Since then, says George Terwilliger...
GEORGE TERWILLIGER: You know, the government has been looking around for villains to charge with crimes growing out of the financial crisis for quite some time and, for the most part, has not brought major cases. There's been a lot of garden variety mortgage fraud cases sort of at the main street level. But for the most part, there have not been Wall Street cases.
JOHNSON: Terwilliger was a top official at Justice during the George H.W. Bush administration. He managed the response after the savings and loan crisis when, he says, a lot of crooks got charged with crimes. These days, the Obama Justice Department is spending time on other priorities, as the U.S. Chamber of Commerce noted during a conference session this week about regulatory overreach.
Lisa Rickard is president of the Chamber's institute for legal reform.
LISA RICKARD: And over the last few years, we've seen record-breaking enforcement of statutes like the Foreign Corrupt Practices Act and the False Claims Act.
JOHNSON: The False Claims Act, which focuses on fraud against the U.S. government is the same tool authorities used to sue Bank of America over shoddy mortgage loans its countrywide units sold to Fannie Mae and Freddy Mac. David Ogden, a former deputy to Attorney General Holder told people at the Chamber event that prosecutors hold tremendous power over companies.
DAVID OGDEN: The crimes are committed by people. If you punish the company, you are punishing a bunch of people who didn't commit the crime - shareholders, other employees of the company, people who live in the communities where those companies do business.
JOHNSON: Jeff Connaughton says he understands that, but he doesn't get why no corporate executives have gone to prison. And he says, chances are now, we'll never know. Carrie Johnson, NPR News, Washington.
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