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June 4, 2012

DOJ’s Response to Grassley Gives Details, but Not the Right Details

By: Nicole Kardell

The Justice Department showed off some fancy dance moves in a recent sidestep it used to respond to an inquiry from Senator Chuck Grassley (R-Iowa). Grassley wanted detail from Justice to support its claims that it has brought thousands of mortgage fraud cases, including numerous convictions against Wall Street execs, following the 2008 housing crisis. Justice provided detail . . . but not detail responsive to Grassley’s request.

The senator had submitted a letter to Justice in March as a follow-on to a Senate Judiciary Committee hearing on the DOJ’s prosecutorial record. At the hearing, Grassley criticized the DOJ for its “terrible” record on prosecuting mortgage fraud, in particular for its failure to go after the higher-ups at Wall Street firms ultimately responsible for the financial crisis. The agency later retorted that it had brought “thousands of mortgage fraud cases over the past three years, and secured numerous convictions against CEOs, CFOs, board members, presidents and other executives of Wall Street firms and banks for financial crimes.” Grassley asked for the details, particularly requesting that the agency indicate which convictions were obtained against executives.

We previously wrote about the Iowa senator’s request and questioned whether he was doing a bit of grandstanding and overstating prosecutorial issues. But Justice’s response gives one pause to question whether the agency has been lax in investigating Wall Street, and trying to gloss over this reality.

What Grassley received from Justice in response to his request (weeks after his deadline) was an extensive list of cases. Glaringly missing were specifics on prosecutions against executives for mortgage fraud. The DOJ noted in its letter that it “does not maintain [such] statistical data” and thus could not generate a list based on business titles. Nonetheless, it then identified several cases against high-level officers and executives across financial crimes, including cases for insider trading and Ponzi schemes.

Anyone considering the DOJ’s response for more than a minute should see the game it was playing. If Justice could provide a list of cases, why could it not pluck data from the list on business titles of the defendants? If it could provide a list of prosecutions of executives across financial crimes, why could it not isolate that list to the immediate question of how many have been prosecuted for mortgage fraud?

Grassley noted that the DOJ’s response “substantiates my suspicion” that it “isn’t going after the big banks, big financial institutions or their executives” and instead is hiding behind numbers. If Justice wants to allay Grassley’s concerns, as well as the general public’s concerns, and prove that it indeed has been proactive in investigating mortgage fraud up and down the ladder – and not just going after smaller fraudsters – it needs to come up with a better response than it has to date.

Justice recently announced yet another working group, the Residential Mortgage-Backed Securities (RMBS) Working Group, to address mortgage fraud. Perhaps this group will be able to better provide some answers. But, as the working group’s predecessors have proved, simply having a bunch of task forces is insufficient, especially in light of some questionable track records.


Ifrah Law is a leading white-collar criminal defense firm that specializes in federal criminal defense including mortgage fraud defense and securities fraud defense.





Nicole Kardell

Nicole is a certified privacy professional with expertise in European privacy law (CIPP/E), in particular the GDPR. She helps companies to navigate the changing face of privacy regulations and to keep their business practices and partnerships in compliance with the law both domestically and abroad.