Showing posts with label fraud. Show all posts
Showing posts with label fraud. Show all posts

Saturday, July 19, 2014

Finally there appears to be an irresistible force bearing down on the immovable objects that we know as the too-big-to-fail, too-big-to-jail criminal banks. May The Force be with us!


Did the Other Shoe Just Drop? Big Banks Hit with Monster $250 Billion Lawsuit in Housing Crisis



Monday, May 27, 2013

Economist and white-collar criminologist, Bill Black, reports on the recent Senate grilling of Apple. He begins "Senator Levin continues to do virtually the only real investigation being done in the United States of the elite entities. And he has summarized this as Apple achieving the holy grail of tax evasion, which is that Apple has succeeded in creating the stateless corporation that makes literally tens of billions of dollars and pays taxes to absolutely no one. And at the hearing that was just conducted, it turned into a love fest for Apple instead of a crackdown on this behavior..."


 theREALnews                                                                               Permalink

Apple Achieves Holy Grail of Tax Avoidance
Bill Black: Senate questions CEO Tim Cook how company earned $30 billion in 'international' profits while paying zero taxes - May 23, 13


More at The Real News

Bio

William K. Black, author of THE BEST WAY TO ROB A BANK IS TO OWN ONE, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics. Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement. Black developed the concept of "control fraud" frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.

Friday, September 21, 2012

ON DECEMBER 8, 2008, NEIL BAROFSKY WAS CONFIRMED AS TROUBLED ASSET PROGRAM (TARP) WATCHDOG. SEVEN MONTHS LATER HE ESTIMATED THAT THE $700 BILLION BAILOUT COULD BALOON TO $23.7 TRILLION! ACCOUNTABILITY WASN'T MANDATED BY TARP. INSTEAD OF LENDING TO STRUGGLING AMERICAN BUSINESSES, THE TOO-BIG-TO-FAIL BANKS WERE HOARDING OR USING THE MONEY FOR SPECULATIVE INVESTING. BAROFSKY HAD NO ENFORECEMENT POWER. MILLIONS OF HOME OWNERS WERE DEFRAUDED. GEITHNER BEARS FULL RESPONSIBILITY. ORDINARY PEOPLE WERE SOLD OUT AND LIED TO. WALL STREET CRIMINALS POCKETED THE BAILOUT MONIES AND PASSED THE BILL TO THE TAXPAYERS.













September 21, 2012 at 01:38:05

Promoted to Headline (H3) on 9/21/12:     Permalink


Bailout Fraud and Unaccountability

By (about the author)

opednews.com


Bailout Fraud and Unaccountability
TARP watchdog exposes fraud.

by Stephen Lendman

On December 8, 2008, the Senate confirmed Neil Barofsky's nomination as Troubled Asset Relief Program (TARP) watchdog. He assumed the post of SIGTARP (Special Inspector General for TARP).

On July 20, 2009, he estimated the $700 billion bailout fund could balloon to $23.7 trillion. Obama administration secrecy conceals what's essential to reveal. Over $9 trillion is known. Some analysts think true figures may be three times that amount. Only crooked bankers and corrupt bureaucrats know for sure.

In February 2009, Barofsky submitted an initial report to Congress. In the past two months, he said, Washington handed out hundreds of billions of dollars (like confetti) to troubled financial institutions.

Where did the money go, he asked? What assurances exist that it's not stolen or wasted?

TARP didn't require recipients to report or internally track funds used. Accountability wasn't mandated. Banks took full advantage. Instead of loans to stimulate recovery, they hoarded cash, acquired other financial institutions, paid off debt, speculated, and knew then and now there's plenty more help for the asking.

Fraud prevention standards weren't imposed. Barofsky doubts the program's longterm success.

On March 29, 2011, he headlined a New York Times op-ed "Where the Bailout Went Wrong," saying:

Two and a half years after legislation passed, Obama officials declared mission accomplished. "On my last day as the special inspector general".I regret to say that I strongly disagree."

TARP and what followed struck out. It "failed to meet some of its  most important goals." Main Street was sacrificed for  Wall Street.

Congress was told TARP funds would buy up to $700 billion of mortgages. Authorizing legislation (the Emergency Economic Stabilization Act - EESA) emphasized preserving homeownership.

Treasury officials promised help. EESA mandated it. Struggling homeowners got none. Legislative provisions were violated. Treasury changed the rules. Money went to banks with no accountability or mandate to extend credit.
"There were no strings attached: no requirement or even incentive to increase lending to home buyers, and against our strong recommendation, not even a request that banks report how they used TARP funds."
Instead of increased lending, it declined. As inspector general, Barofsky had no enforcement power. He could only recommend. Suggested policies fell on deaf ears. Treasury and Wall Street conspired to commit grand theft. Ordinary people were hung out to dry and scammed.

Helping homeowners was shelved. The Home Affordable Modification Program (HAMP) was introduced. Obama promised four million families help. The program was "a colossal failure."

It was designed to fail. Its provisions included no accountability. Guidelines only were provided. Banks and other mortgage services ignored them. Foreclosures mounted. Millions of homeowners were defrauded. Nothing changed to this day.
One of HAMP's most pernicious abuses was letting servicers "direct borrowers who were current on their mortgages to start skipping payments, telling them that that would allow them to qualify for a HAMP modification," said Barofsky. "Homeowners who might have been able to ride out the crisis instead ended up in long trial modifications, after which servicers would deny them a permanent modification and send them an enormous 'deficiency' bill." "Borrowers who might otherwise never have missed a payment found themselves hit with whopping bills that they couldn't pay and now faced foreclosure. It was a disaster."
Geithner bears full responsibility. Understating problems, he admitted solutions "won't come close" to expectations. He refused to address glaring shortfalls. He abandoned Main Street for Wall Street. He's complicit in grand theft. He and banker cronies belong in prison.

Banks know they can steal with impunity. They're larger and more powerful now than when crisis conditions erupted. They can speculate recklessly. They'll be bailed whenever they get in trouble.

Treasury "ignore(d) rather than support(ed) real" reforms. Its "broken promises" turned TARP and other programs into a giant Wall Street "giveaway."

Its "mismanagement" and criminal complicity "damaged the credibility of the government"." Conditions are so out of control that future policy makers may be unable "to save the system the next time a crisis arises."

Perhaps that's TARP's "most lasting, and unfortunate, legacy."

Barofsky's new book "Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street" explains. 

Writer/Roosevelt Institute fellow Matthew Stoller calls it "a very important" account of the financial crisis aftermath. In April 2010, Barofsky met a key adversary.

Herbert Allison formerly headed Merrill Lynch, TIAA-CREF and Fannie Mae. He came out of retirement to oversee TARP. He became Assistant Treasury Secretary for Financial Stability.
"Have you thought at all about what you'll be doing next," he asked. "Out there in the market, there are consequences for some of the things you're saying and the way you're saying them."
Barofsky knew he was being threatened "with lifelong unemployment." Going along instead of bucking the system assures revolving door plum positions. "It was gold or the lead," he explained.

Cooperate and get rich. Don't and lose out. At first, he "had no idea that the US government had been captured by" bankers. He was "shocked (at) how much control" they have over policy on their own terms. Treasury goes along deferentially. Republicans or Democrats agree on core issues.

He was hijacked and hamstrung. Too big to fail constitutes near omnipotence. Whatever Wall Street wants it gets. Contesting its power is futile.
Stoller calls "Bailout" an account of "the importance of Congressional oversight in reigning in corruption, and the problems of our imperial Presidency."
Barofsky hoped for press and congressional attention. "Our message was simple," he said. "Treasury's desperate attempt to bail out Wall Street was setting the country up for potentially catastrophic losses."

Throughout his tenure, he was obstructed. He faced road blocks, ambushes, trench warfare, and threats in trying to do his job.

On arrival at Treasury, he saw ornate large offices given top officials. He got a small, foul-smelling basement one with barred windows. He spent most of the next three years there. He wasn't welcome unless he played ball. It's not his style and he refused.

He explained what he saw graphically. Homeowners were abandoned and scammed. A tsunami of evictions, foreclosures, fraud, mortgage document robo-signings, blighted neighborhoods, and homelessness continues without relief.

Taxpayers got the bill. Bankers got benefits. So did lobbyists and go-along politicians. The combination of Treasury criminality, White House complicity, congressional laxity, and regulatory failure keeps the dirty game going.

Since crisis conditions erupted five years ago, ordinary people were sold out and lied to. Obama exceeded the worst Bush administration policies. Political corruption is rampant.

Barofsky's best efforts failed. Attempts to achieve accountability, transparency, controls, and consumer protections proved no match for entrenched bureaucratic power, privilege and complicity with Wall Street.

He issued numerous reports. Geithner and other Obama officials buried them. Media scoundrels largely ignored them.

Barofsky believes Geithner, complicit officials, and Wall Street crooks should be fired and prosecuted. Don't expect it as long as criminals run America.

Five years after crisis conditions erupted, no top Wall Street or government official faced charges. Unaccountability is institutionalized. An eventual greater crisis looms. Unresolved problems assure it. When is anyone's guess.


Stephen Lendman lives in Chicago and can be reached at Email address removed .

His new book is titled "How Wall Street Fleeces America: Privatized Banking, Government Collusion and Class War"

http://www.claritypress.com/Lendman.html


I was born in 1934, am a retired, progressive small businessman concerned about all the major national and world issues, committed to speak out and write about them.

Saturday, August 18, 2012

WHAT WILL HAPPEN TO YOUR SAVINGS ACCOUNTS AND RETIREMENT PLANS WHEN THE BIG BANKS FAIL? AMERICANS SHOULD WANT TO KNOW ...BEFORE IT'S TOO LATE TO DO ANYTHING ABOUT IT.





Ann Barnhardt - A Matter of Record 

http://youtu.be/GwKGNO59pqA

Published on Aug 14, 2012 by wepollock 

Ann Barnhardt and I (Warren Pollock) talk about the most important issues of today including the property rights, collateral, the lack of safety in savings and retirement plans, and the 2012 election. We discuss the Sentinel Bankruptcy as a test case for violating key safeguards to any and all of your financial instruments within the context of fraud or banking interests. This ruling has major implications to you as well as Jon Corzine. We anticipate the need to fund Treasuries with funds captured in retirement plans. Most importantly, Ann and I describe events without pointing the finger to "them" this is a time to take personal responsibility by finding clarity in current events. 

Friday, July 06, 2012

MATT TAIBBI FREAKS OUT OVER THE LIBOR BANKING SCANDAL


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Matt Taibbi at Skylight Studio in New York, 10/27/10. (photo: Neilson Barnard/Getty Images)














Why Is Nobody Freaking Out About the LIBOR Banking Scandal?

By Matt Taibbi, Rolling Stone
05 July 2012


he LIBOR manipulation story has exploded into a major scandal overseas. The CEO of Barclays, Bob Diamond, has resigned in disgrace; his was the first of what will undoubtedly be many major banks to walk the regulatory plank for fixing the interbank exchange rate. The Labor party is demanding a sweeping criminal investigation. Mervyn King, Governor of the Bank of England, responded the way a real public official should (i.e. not like Ben Bernanke), blasting the banks:
It is time to do something about the banking system…Many people in the banking industry are hardworking and feel badly let down by some of their colleagues and leaders. It goes to the culture and the structure of banks: the excessive compensation, the shoddy treatment of customers, the deceitful manipulation of a key interest rate, and today, news of yet another mis-selling scandal.
The furor is over revelations that Barclays, the Royal Bank of Scotland, and other banks were monkeying with at least $10 trillion in loans (The Wall Street Journal is calculating that that LIBOR affects $800 trillion worth of contracts).

The banks gamed LIBOR for two semi-overlapping reasons. As noted here last week, there were instances of Barclays traders badgering the LIBOR submitters to "push down" rates in order to fatten their immediate bottom lines, depending on what they were trading or holding that day. They also apparently rigged LIBOR downward in order to produce a general appearance of better health, essentially tweaking their credit scores a few ticks upward.

Most intriguingly, or perhaps disturbingly, there were revelations last week that Bank of England deputy Governor Paul Tucker had a conversation with Diamond at the peak of the crisis in 2008. The conversation reportedly left Diamond, and subsequently his traders, with the impression that the bank had carte blanche to rig LIBOR downward in order to help allay spiraling public fears about the banks’ poor financial health.

British officials, and Tucker individually, deny that Tucker gave Diamond permission to rig rates. But a report by British regulators did conclude that the two were talking about Barclays LIBOR submissions on October 29, 2008, and that as a result of that conversation, Diamond came away with a “misunderstanding.” The Daily Mail quotes the Financial Services Authority report:
However, as the substance of the telephone conversation was relayed down the chain of command at Barclays, a misunderstanding or miscommunication occurred.
This meant that Barclays’ submitters believed mistakenly that they were operating under an instruction from the Bank of England (as conveyed by senior management) to reduce Barclays’ Libor submissions.
That is explosive stuff. Members of Parliament will be grilling Tucker tomorrow about those events in what is sure to be a far more combative and entertaining legislative inquiry than the Jamie Dimon dog-and-pony show we just went through here in the states in recent weeks.

The implications of that part of the story should be particularly chilling to Americans, who in recent years have been party to a number of revelations about strange and seemingly inappropriate contacts between senior regulatory officials and big bankers during the heat of the crisis.

We know that American officials in 2008-2009 were extremely concerned about the appearance of weakness in the financial markets, so much so that they may have resisted pursuing criminal prosecutions against big banks, and we also know that they spent a lot of time commiserating with Wall Street figures before and during the crisis.

If Bob Diamond and Paul Tucker were having these talks about LIBOR, is it fair to wonder what else Hank Paulson and Lloyd Blankfein were talking about in the 24 discussions they had in the six days following the AIG disaster? When Paulson had a secret meeting with the entire board of Goldman Sachs in, of all places, his hotel suite in Moscow, in June of 2008? Or what other material nonpublic information was exchanged when Paulson met with a gang of hedge fund chiefs at the offices of Eton Park management in July 2008, and laid out for them a possible scenario for putting Fannie and Freddie into receivership?

Anyway, the LIBOR story is leading the front pages of most of Britain’s dailies, it’s on TV, and it’s producing blistering editorials and howls of outrage amongst politicians and activists. But as compadre Yves Smith at Naked Capitalism put it, where’s the outrage here in America?

The big story on our shores in the last few weeks has been the health care ruling, which makes sense, but then after that… what? The heat? Tom and Katie? (There’s actually a story about how Katie can wear heels again, now that she’s not married to a short person). Joe Sandusky? Nightline’s big story tonight, which is already being hyped on the net, is about how fat Chris Christie is and why the hell he hasn’t done the bypass surgery yet:
New Jersey Gov. Chris Christie opened up about his weight problem in an interview with ABC News and stressed he is "trying" to lose weight, a battle he's waged for 30 years, but said he's never considered gastric bypass surgery because it's "too risky."
"I mean, see, listen, I think there's a fundamental misunderstanding among people regarding weight and regarding all those things that go into, to people being overweight," Christie said in an interview that will air Tuesday on "Nightline."
Glad to be informed! The New York Times, meanwhile, did chime in with a house editorial yesterday, and it was appropriately somber. And there has been some coverage in the financial press.

But to me what’s missing from all of this is the “Holy Fucking Shit!” factor. This story is so outrageous that it shocks even the most cynical Wall Street observers. I have a friend who works on Wall Street who for years has been trolling through the stream of financial corruption stories with bemusement, darkly enjoying the spectacle as though the whole post-crisis news arc has been like one long, beautifully-acted, intensely believable sequel to Goodfellas. But even he is just stunned to the point of near-speechlessness by the LIBOR thing. “It’s like finding out that the whole world is on quicksand,” he says.

So as far as the stateside press goes, I’ve got to assume the cavalry is coming soon. But when?

THE LIBOR SCANDLE "IS THE LARGEST RIGGING OF PRICES IN THE WORLD BY MANY ORDERS OF MAGNITUDE" -- ECONOMIST AND CRIMINOLGIST, BILL BLACK






UK to launch inquiry into banking scandal 

Published on Jul 2, 2012 by AlJazeera

English Prosecutors in Britain are considering filing criminal charges against Barclays Bank. The UK lender is at the centre of a market manipulation scandal that could involve more than a dozen international banks. While much of the fallout has been confined to Britain - it's likely to spread overseas because Barclays manipulated a key interest rate known as libor - which is used to determine the value of financial products ranging from credit cards to ordinary loans. Al Jazeera's Laurence Lee reports from London. 


How Barclays manipulated the libor rates 

http://youtu.be/ZC_la9ar93w

Published on Jul 2, 2012 by AlJazeeraEnglish 

The Barclays Bank scandal centres around a key interest rate known as Libor. Al Jazeera's Dominic Kane reports on exactly what that is. We also speak to Bill Black, a former US banking regulator for more clarity on how this multi-million dollar fraud was perpetrated. 

Saturday, March 24, 2012

PROFESSOR WILLIAM K BLACK: "...EVERYBODY THAT KNOWS ABOUT FRAUD HAS SAID THAT [THE JOBS ACT] IS THE WISH LIST OF EVERY FRAUD-FRIENDLY PRACTICE IN THE WORLD PUT TOGETHER IN A BILL, AND WE HAVE CONGRESS DELIBERATELY SCREWING UP THE CONGRESSIONAL RULES PREVENTING HEARINGS BECAUSE THEY KNOW THAT THIS COULD NEVER BE EXPOSED TO REAL DISCUSSION BY EXPERTS AND PASSED."









TBTF Sheriff Bill Black on the MF Global Cover-up: "All those that doeth Evil hateth the light!"



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Welcome to Capital Account. The Federal Reserve Bank of Dallas says Dodd-Frank did not end too big to fail, and says we must downsize the TBTF monsters in the view of Richard Fisher. This, as some US lawmakers are working to push back the timeline for a key part of Dodd-Frank, the Volcker Rule...a rule regulators and banks already appear to be hollowing out. We'll look at what the costs of these actions could be

Meanwhile, the "Corzine Rule" is reportedly gaining momentum -- this would restrict what brokerage firms can do with customer money. Before looking forward -- what about the unanswered questions and accountability in the MF Global bankruptcy and what we consider theft of customer money? We'll talk to William K. Black, the former regulator who oversaw prosecutions of bankers for fraud during the S&L crisis to find out what it would take to see justice in this case. We will discuss some of the peculiarities surrounding the MF Global bankruptcy, the decision by CFTC chairman Gary Gensler to proceed with a Chapter 11 bankruptcy as per the SEC, with a SIPA/SIPC liquidation for the brokerage unit, which put the customers on even footing with the creditors, instead of a Chapter 7 bankruptcy for the entire company. We ask Bill Black if this is an example of control fraud and regulatory capture, and where a crime has been committed here.

Meanwhile, do you think we have enough lawyers in the US already? Well, you may be happy to hear this...the organization behind the law school admissions test -- the LSATS -- saw the largest decline in people taking the test in more than a decade. Is "the law" in a bear market? Demetri think so. He says the bear market in the legal system is the corollary for the bull market in whistle blowing. Otherwise, you wouldn't need monetary incentives beyond what is already in place to get lawyers to prosecute crimes. Whistle blowers make it easy for the prosecution.

Saturday, May 28, 2011







Will the NY Attorney General Bring Doomsday Charges Against Wall Street? If So, How Long Will He Survive?





Gretchen Morgenson of the New York Times just published one of the few feel good stories in months following the 2008 financial crisis. She describes a possible day of reckoning for the perpetrators of the 2008 crisis and much of the pain that has followed.

The newly elected New York attorney general, Eric Schneiderman (D), wants information from Goldman Sachs, Bank of America, and Morgan Stanley. Among other things, the information concerns mortgage pooling and bundling. This may well include information on collateralized debt obligations (CDO's) and mortgage backed securities (MBS). New York state officials told Morgenson:

"The New York attorney general has requested information and documents in recent weeks from three major Wall Street banks about their mortgage securities operations during the credit boom, indicating the existence of a new investigation into practices that contributed to billions in mortgage losses." New York Investigates Banks’ Role in Financial Crisis New York Times, May 16

Morgenson indicated where the attorney general might be heading - securitization fraud:

"Some litigants have contended, for example, that the banks dumped loans they knew to be troubled into securities and then misled investors about the quality of those underlying mortgages when selling the investments."

"The possibility has also been raised that the banks did not disclose to mortgage insurers the risks in the instruments they were agreeing to insure against default." New York Times, May 16

In addition to the leaked investigation, Morgenson makes a critical point about ongoing federal and state attorneys general efforts for settlement order on mortgage fraud, fictional mortgage agreements, and matters related to ForeclosureGate.

"By opening a new inquiry into bank practices, Mr. Schneiderman has indicated his unwillingness to accept one of the settlement’s terms proposed by financial institutions …" New York Times, May 16

Matt Tiabbi explained what this means:

"If the AGs were to sign off on a friendly global settlement for mortgage abuses prematurely, it would be like a DA offering a millionaire murderer a 2-year plea bargain before the cops even had a chance to interview all the eyewitnesses. It would be a blatantly political arrangement." Matt Tiabbi, May 17

The settlements (consent orders that avoid a trial) by the Obama Department of Justice and the state attorneys general would cost the big banks and Wall Street a few billion dollars in legal fees but free them from civil suits that could stretch into the trillions and jail time for criminal fraud.

The New York AG's actions stop any settlement in its tracks since, according to Tiabbi; it takes all 50 states to generate a consent order. Should it become official, Schneiderman's investigation would also set a high bar for any other settlements. It could also simulate demands for serious prosecutions around the country.

Serious charges by Schneiderman would also make a federal settlement like the one leaked to American Banker look simply awful to the public.

Nexus between Cuomo 2009 Charges against Bank of America, Schneiderman's Investigation, and the Senate Report on "Wall Street and the Financial Crisis"

On February 4, 2009, then New York Attorney General Andrew Cuomo filed a complaint against the Bank of America, Kenneth D. Lewis, and Joseph L. Price.

"The bank and the two named executives are charged with failing to inform the bank's board of directors and shareholders of the major red ink on Merrill Lynch's books prior to the merger. CEO Lewis, CFO Price, and other BofA officers and professionals chose to hide $16 billion of Merrill Lynch known pre tax losses prior to board approval. That's fraud, plain and simple." Michael Collins, Economic Populist, February 8, 2009

The complaint also, "charges that the same parties with strong arming the federal government for $20 billion to cover Merrill's debt by threatening to back out of the merger if the money wasn't forthcoming." Economic Populist

We don't know the exact direction that Schneiderman's investigation and charges will take (if they are any). However, Morgenson notes that Schneiderman may be looking at current civil charges claiming, "that the banks dumped loans they knew to be troubled into securities and then misled investors about the quality of those underlying mortgages when selling the investments." New York Times, May 16

There is a tight fit between the illegal acts and the subject matter of those acts in both Cuomo's case and the attorney general's direction, according to the Morgenson article.

Selling troubled securities without disclosure is precisely the type of fraud that Cuomo charged against Bank of America - defrauding investors on a deal by withholding vital information.

The information withheld in the Bank of America case concerned the huge losses Merrill had incurred in the collateralized debt obligation (CDO) and mortgage backed securities (MBS) market.

The Permanent Subcommittee on Investigations April hearings and report dealt with a broad range of appalling Wall Street behavior leading to the financial crisis. In a memo from Chairman Carl Levin (D-MI) and ranking member Tom Coburn (R-OK), the behavior that Schneiderman is reportedly investigating is described in clear terms:

Steering Borrowers to High Risk Loans. WaMu and Long Beach [as examples] too often steered borrowers into home loans they could not afford…

Polluting the Financial system. WaMu and Long Beach securitized $77 billion in subprime loans…, used Wall Street firms to sell … worldwide, and polluted the financial system with mortgage backed securities. Sen. Carl Levin (D-MI), Sen. Tom Coburn (R-OK), Permanent Subcommittee on Investigations, April 13, 2010

Schneiderman's focus benefits from the groundwork laid by Cuomo's 2009 action. That's a considerable benefit given the depth of interviews and analysis in Cuomo's New York complaint.

The attorney general can also call on the contributions of former Special Inspector General for TARP, Niel Barofsky. The former SIGTARP collaborated wiht Cuomo in the Bank of America complaint. Schneiderman also has the benefit of exhaustive evidence developed by the Senate's Permanent Subcommittee on Investigations.

Should he file a complaint, the attorney general of New Your will have a solid foundation preceding his efforts. Using these resources provides the opportunity for broad based civil and criminal actions .

The Martin Act

Cuomo's charge against Bank of America, Lewis and Price were brought using the Martin Act, a 1921 New York law designed to promote investigations of fraudulent stock market schemes. The law has some unique provisions:

"The purpose of the Martin Act is to arm the New York attorney general to combat financial fraud. It empowers him to subpoena any document he wants from anyone doing business in the state; to keep an investigation totally secret or to make it totally public; and to choose between filing civil or criminal charges whenever he wants. People called in for questioning during Martin Act investigations do not have a right to counsel or a right against self-incrimination. Combined, the act's powers exceed those given any regulator in any other state." Nicholas Thompson, Legal Affairs, May/June 2004

The infrequently used law was the centerpiece of Elliot Spitzer's investigations into Wall Street fraud as New York AG, prior to his election as governor. Had Spitzer survived, it would have produced an array of fraud cases prior to the financial crisis.

If wishes were horses …

If wishes were horses, we'd all take a ride. Spitzer's investigations blew up after a personal scandal. Cuomo's gubernatorial campaign interrupted his Bank of America case of 2009.

We now have the new attorney general, Schneiderman, and the leaked investigation. Robert Scheer praised the effort but expressed this jaded (and probably accurate) caution:

"Eric Schneiderman will probably fail, as did his predecessors in that job; the honest sheriff doesn't last long in a town that houses the Wall Street casino. But decent folks should be cheering him on. Despite a mountain of evidence of robo-signed mortgage contracts, deceitful mortgage-based securities and fraudulent foreclosures, the banks were going to be able to cut their potential losses to what was, for them, a minuscule amount [by the state and federal consent order proposals]." Robert Sheer, Truth Dig, May 17

Sheer has been around long enough to know the odds against the good guys winning, at least for long enough to make a difference. But you never know. Success is often a matter of timing. This attorney general is certainly attacking Wall Street and the big banks at the right time.

The support for serious legal action would be overwhelming. There isn't be a venue in the country that would miss the opportunity to sock it to these and other institutions and put a some of their officials behind bars. Of note, the Martin Act can be used for civil and criminal prosecutions. But let's not get carried away. Trillions lost, a nation in economic distress, 150,000 foreclosures a month…and how many prosecutions have we seen? The only time these guys will do is in a Timex commercial.

END
This article may be reproduced entirely with attribution of authorship and a link to this article.

Sunday, May 08, 2011







Bankruptcy Hell - The Sequel to ForeclosureGate

Submitted by Michael Collins on Mon, 05/02/2011 - 05:44

Michael Collins

You're headed for bankruptcy court tomorrow. It's been a long and difficult road. You and your husband both worked. You made decent money. Then your husband became ill. There was no sick leave because he worked for himself. His disability insurance had a six-month delay and only covered half of the lost income. That was all you could afford. (Image Wikimedia Commons)

His condition was critical and required medication three times a day at a monthly cost of $2500. Your company plan covered your husband but it didn't cover the medication because the insurance company termed it experimental. It was the sole option for the crippling illness according to the three specialists consulted.

Your husband contributed 40% of the family income. The loss was a big hit but you persevered. You couldn't sell the house, even if you wanted to. It was $150,000 upside down. There was no federal or bank program to relieve that burden. After four months of cashing in a modest 401(k), it became obvious that you couldn't make it. You needed relief and time for your husband to get well.

You consulted your accountant. On his advice, you decided to file for bankruptcy.

It was hard to find an attorney to take your case. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made attorneys personally liable for any false claims by filers. That created a lot of extra work and a new risk for bankruptcy attorneys to serve a population that was, by definition, short of cash for legal fees.

When you did get an attorney, you found out that you had to wait an additional six months to file. The new bankruptcy law of 2005 requires credit counseling six months prior to filing.

By the time you got your day in court, you were well overdue for debt relief

Here is what happened in bankruptcy court for the Chapter 13 filing.

The Bank Challenges Your Claim Alleging Fraud

The new bankruptcy law changes things for debtors. In the past, only "substantial abuse" by debtors led to an automatic dismissal of the case. The new law replaced a "a substantial abuse" with "an abuse" Section 102. In the past, only the U.S. Bankruptcy Trustee, an officer of the court, could charge fraud. Creditors now have that option (many of whom stand accused of fraud themselves).

When you got to court, you find out that your bank, MegaCorp, filed a charge of fraud claiming an understatement of your credit card debt. These charges are wrong but you lose a lot of sleep worrying about a violation that has a $250,000 fine and a nine-year prison term.
Before the favorable ruling from the court, you look at the U.S. Trustee Program web site for bankruptcy court.

It is obvious that the Department of Justice program is only interested in debtor fraud. There is no solicitation by the program for creditor fraud reports. Just debtors.

"Name and address of the person or business you are reporting.

"Identify the type of asset that was concealed and its estimated dollar value, or the amount of any unreported income, undervalued asset, or other omitted asset or claim." US Trustee Program

The Bank Leaves out Documentation Critical to Lawful Approval of their Claims against You

Kathleen M. Porter published a landmark study on bankruptcy court in 2007. Porter's research team reviewed 1700 bankruptcy rulings from federal courts across the country. Porter found that required documentation was missing in just over 50% of the cases from the extensive sample.


Professor Porter commented on this failure to comply with documentation requirements:

"Without documentation of the debt, the debtor and other creditors cannot verify the legitimacy or accuracy of claims, each of which cuts into the limited dollars available for distribution. Poor compliance with the claims rules effectively deflects creditors’ obligations onto cash-strapped bankrupt families, who must choose between the costs of filing an objection or the risks of overpayment." K.M. Porter, 2007 p. 36

Porter's research confirmed that only a minority of bankruptcy courts use incomplete documentation to disallow creditor claims. The failure to require proper documentation distorts over 50% of settlements. How can a bankruptcy judge set amounts owed, etc. without knowing the basis for such judgments?

The creditors with the special right to accuse you of fraud get away with filing flawed claims against you. Are their cases dismissed for errors? Hardly ever, according to the study.

You had no idea that the creditor clams were incomplete thus legally flawed. Neither the court nor your lawyer noticed.

There are Creditor Fees that You Don't Understand

The paper chase of bankruptcy often times produces conflicting claims about amounts due. Debtors face tremendous pressure to readjust their entire lives to cope with impending financial doom. The graph below shows that creditors are much more likely to state claims in their favor than are debtors.


Debtors often listed more than they owed. Creditor usually listed more than they were due. Porter's extensive analysis suggested the following:

"Creditors' claims may themselves be bloated and overstate the accurate amount of the debt. Such problems could result from servicers’ practices of loading claims with default fees that are not disclosed to debtors, or because of mistaken calculations of the amount due in preparing the proof of claim; case law has documented both effects." K.M. Porter, 2007 p. 34

Once again, the debtors take the hit, the very people lacking the resources to challenge what they strongly suspect are creditor overstatements of debt.

You knew something was wrong but you didn't have the time or money to challenge your creditor's figures.

The Bank Claim is Approved

You suspect errors in the creditor claims but you can't prove that their figures are overstated. You do not know that your creditors are missing documentation, an error that should nullify their claims.

When debtors make a mistake, their case is subject to dismissal and they face severe penalties. When the courts receive and approve flawed, unlawful creditor filings in 50% of the cases, the court isn't even conducting a cursory review of essential documents. With any degree of diligence, most or all of the flawed creditor filings would be dismissed.

This proves, beyond any doubt, that in many cases, bankruptcy proceedings move forward without creditor adherence to clearly stated legal requirements.

The sole purpose of the court is to enforce the law. That simply doesn't happen for at least 50% of the cases judged.

Later, You Find Out that the Critical Documents were Missing and the Charges were Bogus

How could the bank prevail in this matter, you ask. The bank made a claim that they knew or should have known was false. The bank failed to present documents required from creditors, documents essential to judging the claim and making it conform with the law. The bank also included charges that were wrong and fees that were not warranted. Will the bank be charged with fraud? You want to challenge the ruling in favor of the bank but you're out of money. You now understand why most bankruptcy not contested

Bankruptcy Hell - Abandon hope all ye who enter here

There is no justice guaranteed for the weak, disadvantaged, poor, or dispossessed. Debtors filing bankruptcy operate on a limited budget and simply want the nightmare to end. They want to get on with their lives. They often lack the ability to make legal challenges. When their lawyers don't inform them of those challenges, they have no options.

In the 50% of the cases where critical documents were missing, their lawyers fail to make the challenge. Worse still, in those and other cases where creditor filings are obviously deficient and outside the law, the court misses the error.

Wouldn't it be better if bankruptcy court operated like, let's say, an automobile manufacturer. Honda issued a recall on airbags for 2001 and 2002 models.

"Honda has expanded a previously announced recall of certain 2001 and 2002 model-year vehicles to replace the driver's airbag inflator in an additional 378,758 vehicles in the U.S. … In total, Honda is aware of 12 incidents related to this issue as of February 2010." Honda February 9, 2010

Based on 12 incidents brought to their attention, Honda recalled every vehicle suspected, nearly 400,000.

At least seven federal courts have cited Katherine Porter's study.  Her study included over 1,700 cases., half of which had a defective part - missing documentation required by law to justify the bankruptcy. Compare 850 instances of a defective part with no corrective action to the twelve instances referenced by Honda that generated a universal recall of models for two consecutive years.

Perhaps, the federal bankruptcy courts should emulate the judgment and practices of Honda.

The failure of bankruptcy courts to apply the law equally and the refusal to go back and correct every error in judgment demonstrate that we are clearly not a nation of laws. We are a nation in which the front room of the law serves the back room of The Money Party.

END

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