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U.S. Increases Manpower of Investigation Teams in Fight Against Financial Frauds
April 27, 2012
Five financial analysts and 10 new federal prosecutors have been added to reinforce the government's efforts to investigate misconduct that fueled the financial crisis. The increased staffing reflects a new push by the administration to aggressively pursue cases against firms and individuals who contributed to the 2007-2009 financial crisis, especially ahead of the November election.
The move is a response to the lackluster results put forth by the U.S. Justice Department, that to date has brought few cases against high-profile targets since the crash. And criminal investigations have been closed without bringing charges against firms whose names are closely tied to the 2008 crash, including AIG and Countrywide.
Individual Wall Street players have fared well in avoiding prosecution from the get go, after the Justice Department lost its first criminal case against 2 former Bear Stearns hedge fund managers in 2009. And, while U.S. enforcement authorities have asked for patience, pointing to the complex nature of these cases, their extended track record in court has not produced any measurable improvement.
Even now, as former McKinsey chief and former Goldman Sachs director Rajat Gupta prepares his defense against insider trading charges, the tide appears to be changing in Mr. Gupta's favor as federal investigators spend more and more time following leads that increasingly point to any of several Goldman employees as the source of confidential information leaks.
More on the Task Force. The task force formed earlier this year represents a more coordinated effort than prior investigations, a Justice Department official said in an interview on Thursday. Prosecutors are reviewing documents for both federal and state law violations. In addition to the 50 positions the department previously announced, the DOJ is hiring 10 new assistant U.S. attorneys in districts that include Massachusetts and Colorado, according to job listings on the agency's website. And those 5 financial analysts and auditors who were hired will help the government better understand and identify evidence, the official, who declined to be named, said.
The task force also is focusing more on civil laws, including a little-used federal statute called FIRREA, which may make such cases easier to bring.
Questions remain whether the cases that come out of these investigations involve lower-ranking people or whether they are able to bring larger, systematic cases.
And the search for additional personnel support continues, with the department continuing to look for attorneys to help investigate "and pursue those responsible for misconduct in the packaging, selling, and valuing of residential mortgage-backed securities and similar financial instruments." In another sign the department is looking to pursue these cases through courtroom litigation, it said it is looking for someone who can "handle matters in court persuasively on behalf of the United States.
For further details, go to: [Reuters, 4/27/12].

