Justice Inaction: The DOJ’s Unprecedented Failure To Prosecute Big Finance
H/T Barry Rtiholtz
“Justice is the end of government. It is the end of civil society.”
– Federalist No. 51
President Obama channeled the rhetoric of the Occupy Movements, blaming the worldwide financial collapse on “the reckless speculations of the bankers.” Large financial institutions, banks, investment houses, and hedge funds are alleged to have knowingly committed fraud. Attorney General Eric Holder explained the challenge facing the newly minted Financial Fraud Task Force in 2009.
We face unprecedented challenges in responding to the financial crisis that has gripped our economy for the past year. Mortgage, securities, and corporate fraud schemes have eroded the public’s confidence in the nation’s financial markets and have led to a growing sentiment that Wall Street does not play by the same rules as Main Street Unscrupulous executives, Ponzi scheme operators, and common criminals alike have targeted the pocket books and retirement accounts of middle class Americans, and in many cases, devastated entire families’ futures. We will not allow these actions to go unpunished…This task Force’s mission is not just to hold accountable those who helped bring about the last financial meltdown, but to prevent another meltdown from happening.
Despite Attorney General Eric Holder’s heated rhetoric promising to hold Wall Street accountable, an investigation into the Department of Justice’s handling of the 2008 financial crisis found that:
- The Department of Justice has not filed a single criminal charge against any top executive of an elite financial institution.
- Attorney General Holder, Associate Attorney General Thomas Perrelli, Associate Attorney General Tony West, and Deputy Associate Attorney General Karol Mason all came to the DOJ from prestigious white-collar defense firms, where they represented the very financial institutions the DOJ is supposed to investigate.
- Top DOJ officials played prominent roles in his 2008 campaign. Holder co-chaired the campaign with Tony West, the DOJ’s third highest official.
- No other modern administration has staffed the DOJ with big money fundraisers. Holder bundled $50,000 for Obama’s 2008 campaign, while Perrelli, West, and Mason all bundled $500,000 for the campaign. West also helped raise an estimated $65 million in California.
- Washington’s “Revolving Door” is at work in the DOJ. Top Iustice officials came from and returned to law practices where they defend the financial institutions the Do] is tasked with prosecuting.
DOJ – Historical Narrative
The Obama Administration’s relationship with Big Finance is not just Washington as usual. In 2008, Obama’s largest private source of campaign funding came from Goldman Sachs executives. Candidate Obama outraised McCain on Wall Street – around $16 million to $9 million. Although Obama told Wall Street executives, “My administration is the only thing between you and the pitchforks,” it appears as though the President may be shielding Big Finance from anything like a severe accounting.
While the Justice Department is at present dominated from the top with corporate attorneys, whose links to the very financial institutions they are charged with investigating create conflicts of interest, Presidents George H.W. Bush, Bill Clinton, and George W. Bush hired experienced prosecutors and attorneys to prosecute the financial titans who caused the Savings & Loan, Enron, and WorldCom crises.
Financial fraud prosecutions are down 39 percent since the Enron and WorldCom disasters in 2003, and they are just one third of what they were during the Clinton years. Clinton’s DOJ prosecuted over 1,800 S&L executives, senior officials, and directors, and over 1,000 of them were sent to jail. The number three in George W. Bush’s DOJ formerly served as an attorney at the IRS, and a U.S. Attorney from the Southern District of Manhattan directed Bush’s Task Force. That Task Force did not exempt Jeffrey Skilling and Ken Lay from jail time, although Lay died before he was sentenced. Between 2002 and 2008, this task force obtained over 1,300 corporate fraud convictions, including those of over 130 corporate vice presidents and over 200 CEO and corporate presidents.
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