Why No Financial Crisis Prosecutions? Ex-Justice Official Says It’s Just too Hard

Marian Wang
ProPublica / News Report
Published: Thursday 8 December 2011
The Justice Department has decided that holding top Wall Street executives criminally accountable is too difficult a task.
Article image

It’s an issue we and others have noted again and again: Years after the financial crisis, there have still been no prosecutions of top executives at the major players in the financial crisis.

Why’s that? Well, according to a now-departed Justice Department official who used to be in charge of investigating such matters, the Justice Department has decided that holding top Wall Street executives criminally accountable is too difficult a task.

David Cardona, who recently left the FBI for a job at the Securities and Exchange Commission, told the Wall Street Journal that bringing financial wrongdoing to account is “better left to regulators,” who can bring civil cases. Civil cases, of course, can produce penalties from the banks -- as well as promises to be on better behavior -- but don’t put any executives behind bars. Here’s the Journal:

While at the FBI, Mr. Cardona oversaw dozens of criminal probes of large financial firms. The FBI's probes haven't led to any successful prosecutions of high-profile executives in relation to the financial crisis, despite demands from some lawmakers and angry Americans. In contrast, the SEC has filed crisis-related civil-fraud cases against 81 firms and individuals, and it has negotiated almost $2 billion in penalties in cases that have been settled.

Cardona told the Journal that the failed first attempt to charge financial players with crisis-related fraud -- the 2009 trial and eventual acquittal of two Bear Stearns Cos. hedge-fund managers -- triggered "a lot of rethinking on how we do things.” After that, he said, the federal government began to question its “ability to convince a jury that criminality has occurred” on complex and technical financial cases.

The lack of prosecutions was also raised in a ‘60 Minutes’ piece Sunday about large-scale mortgage fraud during the bubble. Assistant Attorney General Lanny Breuer told CBS that the Justice Department had not lost confidence and was “bringing every case that we believe can be made.”

“I get it. I find the excessive risk taking to be offensive,” said Breuer. “I may personally share the same frustration that American people all over the country are feeling, that in and of itself doesn’t mean we bring a criminal case.”

However, one question raised by the 60 Minutes segment is why the Justice Department isn’t building criminal cases against companies for violating Sarbanes-Oxley -- a landmark corporate reform law enacted after Enron. From the transcript:

The Sarbanes Oxley Act imposed strict rules for corporate governance, requiring chief executive officers and chief financial officers to certify under oath that their financial statements are accurate and that they have established an effective set of internal controls to insure that all relevant information reaches investors. Knowingly signing a false statement is a criminal offense punishable with up to five years in prison.

Frank Partnoy is a highly regarded securities lawyer, a professor at the University of San Diego Law School and an expert on Sarbanes Oxley.

Frank Partnoy: The idea was to have a criminal statute in place that would make CEOs and CFOs think twice, think three times before they signed their names attesting to the accuracy of financial statements or the viability of internal controls.

Kroft: And this law has not been used at all in the financial crisis.

Partnoy: It hasn't been used to go after Wall Street. It hasn't been used for these kinds of cases at all.

Kroft: Why not?

Partnoy: I don't know.

As Cardona -- the former Justice official -- sees it, financial regulators have been doing a “fine job” building civil cases against big firms.

That might come as a surprise to U.S. District Judge Jed Rakoff, who’s repeatedly rebuked the SEC for striking relatively small agreements to settle civil charges against financial firms.

As we noted last week, Rakoff tore into a recent $285 million settlement with Citigroup, calling the financial penalty “pocket change” for Citi and blasting the SEC’s longstanding practice of allowing firms to settle without admitting wrongdoing.

Get Email Alerts from NationofChange
ABOUT Marian Wang

Since graduating with honors from Northwestern University's Medill School of Journalism in 2007, she worked in Chicago as a freelance investigative reporter and blogger for The Chicago Reporter, Chi-Town Daily News, and ChicagoNow. She now lives in New York. She likes it a lot.

FEATURE A

Connect with your friends

Find new content you might like and see what your friends are sharing!

Top Stories

26 comments on "Why No Financial Crisis Prosecutions? Ex-Justice Official Says It’s Just too Hard"

ZGf020 eftuslievmuu

it would be nice if you uelpadod a video or some pictures beffore your cycle that's we can see the gain you made!just curious what is your height and weight?

Wood Gas

December 10, 2011 9:29am

Million$, probably billion$, are donated to campaigners and "serving" members of both parties by "persons" of corporatehood. The Supreme court has been purchased. The Congress has always been corrupt, but now there is no reason to pretend otherwise. The currency has been and is being diluted to worthlessness. "Persons" unaccountable to the people are really running the show. Torture is legal. Congress has destroyed habeas corpus and protection against illegal search and seizure.

So, what are you guys bitchin' about now?

James Badham

December 09, 2011 11:13am

Yeah, but if the barely-crossing-the-line immorality/illegality is hard to prove, conspiracy is even (much) harder.

James Badham

December 09, 2011 11:14am

Sorry, I was replying to JIMMUN a few comments up, but it got placed here.

Kevin Schmidt

December 09, 2011 9:38am

You're completely wrong about that. MERS is a criminal organization that was set up to intentionally defraud every courthouse in the nation out of Transfer Taxes and Recording Fees. The big banks also made fraudulent home loans, which is also a violation of federal law. Then they packaged D paper loans together and sold them as AAA paper, which is another violation of federal law. Finally, they are illegally forging documents that claim they hold title on mortgages so they can illegally foreclose on millions of home owners. Those are just a few of the crimes committed by the big banks. I have yet to list the crimes committed by other Wall Street criminals. Shall I go on?

ajaxon70

December 09, 2011 8:42am

Richard is exactly right! What these guys did may be immoral, but it's not illegal. They take great pains to be sure they don't cross the line - move right up to it, but never cross it. I refer you to Lawrence Lessig's REPUBLIC, LOST. It's great reading and fully explains everything that's going on, including a plan to change things. It will take more than complaining on sites like this AND it will take time. We need to get started! Check out United Republic and Rootstrikers as well.

Kevin Schmidt

December 09, 2011 9:39am

You're completely wrong about that. MERS is a criminal organization that was set up by the big banks to intentionally defraud every courthouse in the nation out of Transfer Taxes and Recording Fees. The big banks also made fraudulent home loans, which is also a violation of federal law. Then they packaged D paper loans together and sold them as AAA paper, which is another violation of federal law. Finally, they are illegally forging documents that claim they hold title on mortgages so they can illegally foreclose on millions of home owners.

Those are just a few of the crimes committed by the big banks. I have yet to list crimes committed by other Wall Street criminals.

bladtheimpailer

December 08, 2011 9:03pm

I'm beyond caring who, when, why where. I say we get justice by taking the whole game away from them. This includes taxpayer funded ineffectual govt agencies. Time to end the current system and games of this immature group of "smart guys." Time for a new democratic party that will end the Fed and it's shareholder big banks, retake control of our money supply, end the practice of fractional reserve/ interest charging banking, eliminate the national debt (doing it this way would take approx. 3-4yrs), and get on with rebuilding and re-invisioning the U.S.of A. I remember my grandfather advising me on a infinatly smaller but similar situation- "don't get angry, get even."

Richard Orton

December 08, 2011 7:40pm

My theory about why no one has been prosecuted is this:

Most of what they have done is probably NOT illegal!

The banksters pay lobbyists big money to write the complex rules, regulations and legislation that govern Wall Street. They conduct their business accordingly and even when they have done something totally immoral that would send anyone else to prison, a close look at the law reveals that what they have done is surprisingly legal on the books.

River Rat

December 08, 2011 7:03pm

Last I heard there are still plenty of pitchforks for sale at your local hardware store. Our forefathers knew how to use them. Get marching! Time for a 10 million person march on Wall St and Washington. You ain't gonna get them to listen any other way ... not that I can see.

Kevin Schmidt

December 09, 2011 9:41am

Off with their corporate personhood heads!

bladtheimpailer

December 08, 2011 9:10pm

Now we're talkin! I say time to get a totally new democratic party backed by the people and go to Washington that way. Then once and for all end the games and the means of acquiring the wealth to be able to corrupt the system to play games. F*** them.

G.E.R.R.Y.

December 08, 2011 4:39pm

"We need sheep to be at the decision table..."

Here's a quote for you:

Democracy must be something more than two wolves and a sheep voting on what to have for dinner. James Bovard

JustSomeGuy

December 09, 2011 4:06am

Didn't Ben Franklin say something to the effect that well armed sheep (the Second Amendment) would mean the sheep had some voice in the decision?

Ronni85

December 08, 2011 3:18pm

The banksters are too big - the feds have been bought off as has the rest of the government. The only way this will be done is for "WE, the people" to do it ourselves. It is no problem to get any evidence necessary - the Wall Street Bastards are so-o-o-o cocksure no one will ever touch them, they haven't even tried to cover anything up - they actually brag about what they've done.

James Francis

December 08, 2011 2:35pm

The Justice Dept. just doesn't want to go after these poeple because they are major contributors to all politicians of both parties including the president. The least the SEC could do is to threaten to send them to jail if they don't give back all ill gotten gains and penalize them, but that won't happen. Even the party that claims to represent the working class is on the take too. There ain't very much difference.

The justice dept folks are bit smart enough to go after wall street banksters

Jimmun

December 08, 2011 1:52pm

This should be a natural venue for application of the RICO statutes--a criminal conspiracy involving many players who colluded to steal money from the poor and middle class. The real problem is that the politicians need these criminals to fund their reelection campaigns, something they won't do from behind bars.

Mick Price

December 09, 2011 5:34pm

Using the RICO statutes is just an open admission that they didn't do anything that is objectively criminal so you have to use the bullshit RICO standard where everything is illegal.

johnnydfred

December 08, 2011 1:44pm

So well stated, V. If you haven't already, please take up writing for the people. You're heart is certainly in the right place.

Vvvvvv Vvvvvv

December 08, 2011 1:17pm

THE AMERICAN PIRATES OF WALL STREET, ARE KILLING AMERICANS.

This is not about glamorized or fictional piracy. This is, “real piracy.”

Hundreds of our wealthiest leaders and most powerful corporations know that in the next few years, they will be able to siphon, skim, and steal, so much “NEW CASH,” that they and their progeny will be ultra-rich for generations to come.

No, this is not funny, or fiction, or a conspiracy, it is just simple greed and simple theft.
The new pirates of America have launched an all-out siege on us in order to capture, amass, and hold trillions of dollars for themselves.

All of the recent political power grabs and nonsensical debating is purely a slight-of-hand deflection. President Obama, Democrats, Republicans, the International Press, and even the Tea Party, are watching the tiny pea in the shell game…while the rich and powerful “Piratical Right” is stealing America right out from under us.

Consider that their combined total plunder from corporate flipping, downsizing, offshore labor, speculation, price fixing of oil and energy plus, corruption in defense, healthcare, banking, student loans, foreclosures, etc., etc., is a trillion dollar treasure for these pirates.
Go ahead, put your own calculator to it.

Are they smarter than we are? Yes, and they are laughing at us. I, we, you, and all of us, have not been able see the big picture of what is happening to our own country and to our own people. The rape and theft of America, has been cleverly packaged, promoted, and sold under the guise of “cost-cutting,” “deregulation,” and “free enterprise.”

The “Piratical Right” is directly responsible for millions of people dying, getting sick, losing their jobs and homes, losing their ability to fight, their spirit, and even losing their will to live. The sick smell of this carnage now permeates the air across America.

To us, this is all unimaginable, because we look for some sense or the morality of things. These modern-day American pirates however, have no moral compass. They are devoid of any conscience, humanity or soul, and are feeding on the flesh of the American people.

Don’t look to the President, the Senate, Congress, the press, or any political party to help. Sadly, they just don’t see it, don’t care, or are part of it. “We the people” are on our own. Start asking questions. Demand answers. If we don’t fight back America…who will?

History has taught us how to stop piracy.

V

bladtheimpailer

December 08, 2011 8:46pm

Have you ever got it right V! I say start at the core. Revoke the Fed, take back our control of the money supply, and put the Big banks on full reserve banking. Only then can we call the shots. To do this we'll need a new democratic party fully backed by the people. Otherwise it'll be who can suck up the best for the chance of a job cleaning the 1%'s toilets.

Norman Allen

December 08, 2011 1:05pm

When the representatives of the wolves maker rules for the sheep, they do not want to make wolves accountable... That is the tragedy of continuous schemes of the wolves going unpunished and the sheep keep losing arms, legs, and life without consequence to the wolves or their representatives. We need sheep to be at the decision table before they are all eaten up.... Wonder if sheep can continue to OWS and make trouble for the wolves until they listen.

jjflash007

December 08, 2011 1:02pm

Hey, they're all just good ole boys, right? Let's stick to prosecuting the down and out... that's easy.

skingk

December 08, 2011 9:55am

Also, because Obama and Holder are treacherous shills for Goldman Sachs and the other banksters. New York has a law against Corrupt Enterprises and the Feds have the RICO Act.