The U.S. Court of Appeals for the 3rd Circuit is currently considering a sentencing issue of great significance in cases in which a number of individuals work together to bring about a financial fraud. The question posed is the extent to which a defendant can and/or should be punished based on the profits made through the fraud when the defendant did not receive as much money from the fraud as his co-conspirators.
In Kluger v. United States, the appeals court must determine whether former attorney Matthew Kluger’s sentence was unduly harsh. Kluger was one of three men who pleaded guilty to insider trading last year in federal district court in Newark, New Jersey. In his plea, Kluger, who is 51, admitted that he stole data on about 30 transactions during 17 years at law firms that included Skadden, Arps, Slate, Meagher & Flom and Wilson Sonsini Goodrich & Rosati. The companies involved include Sun Microsystems, 3Com Corp., and Acxiom Corp. Kluger gave that information to his co-defendant, Kenneth Robinson, who in turn gave them to trader Garrett Bauer, who traded on the information and then sold at a great profit when the deals went public. Following the scheme, Bauer then distributed the money to his partners. Over the last four years of this arrangement, according to prosecutors, Bauer made about $32 million in illicit profits, while Robinson made more than $875,000. Kluger claims to have made more than $500,000.
The sentences that were meted out to Kluger and Bauer did not track this huge disparity in the benefit that each received from their illegal activities. Bauer was sentenced to nine years imprisonment. Kluger received a sentence of 12 years – the longest prison sentence ever given for insider trading, eclipsing the 11-year sentence received by Galleon Group co-founder Raj Rajaratnam. In sentencing Kluger, Judge Katherine Hayden said that she wanted to send a strong message about the “radiating effect of the loss of confidence in the market” caused by insider trading. Judge Hayden also emphasized Kluger’s abuse of trust given his position as a lawyer. Robinson, who cooperated with authorities and secretly recorded the other men for the FBI, received a sentence of only 27 months.
The notion that a defendant may be sentenced based on the aggregated gains of his co-conspirators is nothing new. Section 1B.1.3(1)(a)(1)(B) of the U.S. Sentencing Guidelines expressly provides that, “in the case of a jointly undertaken criminal activity,” relevant conduct (which sets the amount to be used to calculate upward adjustments in the loss table of Section 2B1.1) includes “all reasonably foreseeable acts and omissions of others in furtherance of the jointly undertaken criminal activity . . .” But the acceptance of this approach may be strained by cases of insider trading and other white-collar crimes that increasingly involve astronomical amounts of money, and therefore expose all participants to draconian criminal sentences.
In appealing Kluger’s sentence, his attorneys stressed that the district court appeared not to have considered the disparity in the amount of money that Kluger actually received as a result of the insider trading compared with at least one of his co-conspirators. This argument echoes some of the reasoning of Judge Jed Rakoff in his sentencing of Rajat Gupta, who likewise received far less benefit from insider trading than his co-conspirator, Rajaratnam. The issue raises an interesting question: Should a defendant’s sentence be commensurate only with his or her own personal gain? Or is the measure of the proper severity of a sentence the total gain obtained by all of the participants – an approach that appears to be more in step with the concept of “relevant conduct” that plays an important role in calculating advisory ranges under the Sentencing Guidelines?
The Third Circuit’s determination on this issue may signal the direction that the courts take on this issue, or may be just the first ruling in what becomes a split among the circuits. The resolution of this issue will be particularly important in cases in which Section 2B1.1 (the loss value table) plays a critical role in determining Guidelines sentences.
Last December, we wrote about the U. S. Securities and Exchange Commission’s issuance of so-called “Wells” notices indicating that the agency was considering whether to bring enforcement proceedings against Netflix and its CEO, Reed Hastings. The SEC’s ire was aroused by a posting by Hastings on his personal Facebook page about Netflix’s success. The agency was concerned about whether such statements in social media complied with disclosure requirements known as “Regulation Fair Disclosure” or “Reg FD.”
In general, Reg FD requires that, when an issuer discloses material, nonpublic information to certain individuals or entities – generally, securities market professionals such as stock analysts or holders of the issuer’s securities who may well trade on the basis of the information – the issuer must make public disclosure of that information. The purpose of these restrictions is to prevent issuer companies from disclosing material information preferentially to certain traders or securities market professionals.
On April 2, 2013, the SEC issued a report that made clear that companies that use social media outlets like Facebook and Twitter to announce key information are in compliance with Reg FD so long as investors have been alerted about which social media will be used to disseminate such information. In approving the use of social media (with the stated proviso), the SEC reinforced that Reg FD applies to the use of what it characterized as “emerging means of communication” the same way that it applies to company websites, and referenced the SEC’s 2008 guidance regarding the use of websites.
The SEC’s conclusion should be no surprise. On the one hand, it reinforces the widely recognized and increasing use of social media as a source of information by a growing segment of the population. On the other hand, it serves as a reminder to companies that they need to make sure that all investors know and have access to the channels that the companies use to issue important information.
The likelihood, for now, is that companies will continue to use a variety of means to issue information to the public – including social media, websites and more old-school methods such as press releases. But the acceptance of social media as an appropriate means of disclosure for publicly owned companies is an important step forward in the evolution of social media from a means of friendly banter to an important information channel for businesses and investors alike.
People these days use Facebook to tell their “friends” about all kinds of things – a favorite TV show, a political bent, a new relationship and all kinds of other details about their lives. But recent enforcement action by the U.S. Securities and Exchange Commission should make clear to corporate officers and boards that Facebook may not be the best place to talk about company operations.
Netflix and its Chief Executive Officer, Reed Hastings, both received so-called “Wells” Notices from the SEC last week arising from Facebook postings that Hastings made in June about the company’s success. An SEC Wells notice notifies a company or individual that the agency intends to recommend enforcement action and invites the company or individual to submit an explanation to the SEC why it should not proceed.
In July, Hastings wrote on his Facebook page that Netflix users streamed more than 1 billion hours of video in June. The SEC is questioning whether that disclosure – access to which would be limited to those who are “friended” with Hastings on Facebook — violated fair disclosure regulations known as “Reg FD”. Reg FD states that, when an issuer discloses material, nonpublic information to certain individuals or entities – generally, securities market professionals such as stock analysts or holders of the issuer’s securities who may well trade on the basis of the information – the issuer must make public disclosure of that information. The purpose of these restrictions is to prevent issuer companies from disclosing material information preferentially to certain traders or securities market professionals.
Over the years, the SEC has periodically issued guidance about how Reg FD should be applied to developing technologies – first in the context of websites and then in the context of blogs. It does not appear, however, that the agency has previously issued formal guidance for the use of other forms of social media such as Facebook. The general requirements for the use of such technologies in compliance with Reg FD is that the information must be published through a “recognized channel” of distribution, and it must be disseminated in a manner designed to reach the public in general.
In public statements, Netflix and Hastings note the large number of people with access to the Facebook post (which they set at 200,000) included a number of reporters and bloggers, and argue that the size and composition of this audience make the Facebook posts fully compliant. They noted that many people re-posted the post (making it available to an even broader audience) and that there was press coverage thereafter as well. They have also asserted that the fact disclosed was not “material” to investors, noting that there had been a previous statement on Netflix’s blog as few weeks earlier that they were serving nearly 1 billion hours per month. While the value of Netflix stock did rise on the day of the Facebook post, Netflix and Hastings note that the increase started well before that mid-morning post, and assert that it was likely due to a positive Citigroup research report issued the previous evening.
It very well may be that the SEC accepts the explanation proffered by Netflix and Hastings and decides not to proceed with its civil enforcement action. Nevertheless, the story is a good object lesson for corporate personnel regarding the care that must be taken with statements in social media, and perhaps a sign of how government regulators are beginning to scrutinize social media as a new forum in which they may find violations of the regulations under their purview. To the extent that the SEC anticipates policing Facebook or other social media as part of its regulatory oversight of information disclosure, the agency should, in fairness, make clear to issuers the parameters of acceptable statements in those fora.
On October 24, 2012, U.S. District Judge Jed Rakoff sentenced Rajat Gupta to 24 months after he was found guilty by a jury of one count of conspiracy and three counts of substantive securities fraud, in connection with providing material non-public information to convicted inside trader Raj Rajratnam. This two-year prison sentence was substantially below the applicable advisory range under the United States Sentencing Guidelines and, in the week since that ruling, much has been said about whether or not this sentence was appropriate.
But the most remarkable part of Judge Rakoff’s sentencing ruling was his unflinching analysis of the way in which the application of the Sentencing Guidelines to white collar fraud cases does not reflect empirical analysis about those offenses or those who commit them – an argument that defense counsel have been making for some time with mixed success.
Judge Rakoff began his analysis with an eloquent and incisive observation about his role as a sentencing judge and the inadequacy of the sentencing guidelines as a comprehensive tool to determine a defendant’s sentence:
Imposing a sentence on a fellow human being is a formidable responsibility. It requires a court to consider, with great care and sensitivity, a large complex of facts and factors. The notion that this complicated analysis, and moral responsibility, can be reduced to the mechanical adding-up of a small set of numbers artificially assigned to a few arbitrarily-selected variables wars with common sense. Whereas apples and oranges may have but a few salient qualities, human beings in their interactions with society are too complicated to be treated like commodities, and the attempt to do so can only lead to bizarre results.
Judge Rakoff noted that the Sentencing Guidelines were “originally designed to moderate unwarranted disparities in federal sentencing” on the theory that the Guidelines “would cause federal judges to impose for any given crime a sentence approximately equal to what empirical data showed was the average sentence previously imposed by federal judges for that crime.” Of course, as the Supreme Court has already observed, the Guidelines deviated from this goal almost from the start.
For example, based on “limited and faulty data,” the Sentencing Commission determined that an ounce of crack cocaine should be treated as the equivalent of 100 ounces of powder cocaine for sentencing purpose, even though the two substances were chemically almost identical and, as later studies showed, very similar in their effects. The result of this empirically unsupportable conclusion was an indefensible racial disparity in narcotics sentencing. Kimbrough v. United States, 552 U.S. 85, 96-98 (2007). Judge Rakoff noted that, even when the Sentencing Commission changed the ratio from 100-to-1 to 18-to-1 in 2010, that ratio was likewise not based on empirical evidence but was merely “plucked from thin air.”
Judge Rakoff went on to observe that the Guidelines applicable to white collar fraud likewise “appear to be more the product of speculation, whim, or abstract number-crunching than of any rigorous methodology,” and that this “maximize[es] the risk of injustice.” Noting the huge increases in the recommended Guidelines for fraud cases, Judge Rakoff noted that the resulting advisory ranges “are no longer tied to the mean of what federal judges had previously imposed for such crimes.” Rather, these sentences “instead reflect an ever more draconian approach to white collar crime, unsupported by any empirical data.”
In short, congressional mandates to get tougher on fraud have resulted in a singular focus on one factor – the amount of loss – that “effectively ignored the statutory requirement that federal sentencing take many factors into account, see 18 U.S.C. § 3553(a), and by contrast, effectively guaranteed that many such sentences would be irrational on their face.” The result, Judge Rakoff observed, was “to create, in the name of promoting uniformity, a sentencing disparity of the most unreasonable kind.”
Regardless of whether or not one agrees with the sentence ordered in the Gupta case, Judge Rakoff’s analysis of the way in which the Sentencing Guidelines fail to promote justice in white collar cases is sure to have significant weight in other cases going forward. As structured, federal sentencing begins with a calculation of the advisory Guidelines range, and then defendants seek a variance from that range under Section 3553(a) – a process that creates a de facto presumption that a defendant will be sentenced within the Guidelines range. A recognition that the Guidelines ranges applicable to fraud crimes are not fair is a good first step towards reforming sentencing in such cases in the interest of true justice.
In electing to testify in his own defense at his federal criminal trial for insider trading, hedge fund operator Doug Whitman made a decision that no other defendants in similar recent prosecutions had chosen. He was still convicted on all counts by a jury, just as were the other defendants who did not take the stand in similar cases.
Whitman operated Whitman Capital, a hedge fund based in Menlo Park, Calif., with about $100 million in assets under management. Prosecutors in the Southern District of New York alleged that Whitman made about $1 million for the hedge fund based on tips from insiders at various technology companies, including Polycom, Marvell Technology Group, and Google.
Whitman was found guilty of two counts of securities fraud and two counts of conspiracy to commit securities fraud. He faces a maximum of 20 years in prison for each charge and sentencing is schedule for December 20.
Five years ago, the Federal Bureau of Investigation launched an initiative known as “Operation Perfect Hedge,” aimed at prosecuting insider trading. The initiative has led to over 65 convictions over the past three years in cases brought by federal prosecutors in New York City. All eight defendants who have taken their cases to trial have been convicted by juries.
Among those convicted was Raj Rajaratnam, a fund manager for Galleon Group LLC, who was found guilty by a jury last year of 14 counts of conspiracy and securities fraud and sentenced to 11 years in prison.
The defense used by Whitman was that all trades that he made were in good faith and were backed by legitimate research. It is a defense similar to the one used by Rajaratnam, though Rajaratnam elected not to testify.
Whitman’s trial was unique because he was the first defendant prosecuted for insider trading who chose to testify in his own defense. Whitman testified that he never intentionally traded on improper information. He contended that his trades were based on research that he did on the companies and were not based on any illegal information. Whitman testified that he did not think that any of his sources possessed secret information.
The government presented three witnesses who had all pleaded guilty to passing illegal information on to traders and agreed to testify in an effort to secure a more lenient sentence. Whitman testified that the three witnesses had falsely implicated him out of their own self-interest. The government also presented secretly recorded telephone conversations that prosecutors alleged proved that Whitman possessed confidential information.
The jury deliberated less than a day before deciding that Whitman was guilty. Some observers suggest that the quick deliberation suggests that the jury gave little credence to Whitman’s testimony.
Ultimately, Whitman was convicted just as other defendants who were charged with similar crimes who did not testify. Defense lawyers know that putting their client on the stand presents significant risks, but they also know that this tactic may also provide an opportunity to show the jury that the defendant did not possess the culpable mental state. We will see whether in the future more defendants charged in insider trading cases elect to testify.
The U.S. Securities and Exchange Commission has charged an executive at Bristol-Myers Squibb with insider trading, citing his Internet searches as support that he tried to cover up his illegal acts.
As a high-level executive in the treasury department at Bristol-Myers Squibb, Robert D. Ramnarine helped the company target, evaluate, and acquire other pharmaceutical companies. The SEC’s complaint, filed in U.S. District Court in New Jersey, alleges that Ramnarine used non-public information obtained in his professional capacity to buy and sell shares in the targeted pharmaceutical companies. According to the complaint, “Ramnarine traded in options of common stock of the soon to be acquired company. After the public announcement of each acquisition agreement, the price of the securities bought by Ramnarine went up and he sold at a profit.” These trades resulted in allegedly ill-gotten gains of at least $311,361.
In addition, Ramnarine was arrested and charged with three counts of securities fraud, each with a maximum sentence of 20 years in prison. He was released on a $250,000 bond.
This case is getting widespread attention not because of the nature of the crime or the amount of money involved, but because of the almost humorously transparent search terms that the SEC alleges Ramnarine entered into search engines regarding his activities, including “can stock option be traced to purchase inside trading,” “insider trading options trace illegal,” and “insider trading options.” According to the complaint, Ramnarine performed these searches the day before buying stock options in one of Bristol-Myers Squibb’s target companies.
Daniel M. Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit, explained these searches by saying, “Ramnarine tried to educate himself about how the SEC investigates insider trading so he could avoid detection, but apparently he ignored countless successful SEC enforcement actions against similarly ill-motivated individuals who paid a heavy price for their illegal trading.”
While we cannot jump to conclusions about why Ramnarine performed these searches, the timing in proximity to the trades is certainly suspect and will leave him with some explaining to do at trial. Ramnarine may not be the first person with an embarrassing search history, but he’s a reminder that it can come to light at any time. With that in mind, for the next time you’re researching a sensitive topic, here’s a link to encrypted Google to use on a public computer.
The U.S. Department of Justice’s recent boasts about rigorous enforcement of the securities laws ran into a significant obstacle this month when a federal judge in Washington, D.C., dismissed part of a $50 million securities fraud case and accused DOJ prosecutors of overreaching. In an increasingly global economy, the case is a good measure of the limits on the ability of the United States government to enforce U.S. law against foreign companies.
The case in question, United States v. Singhal et al., involves a company called Xinhua Finance Limited, which was organized under the laws of the Cayman Islands and is based in Shanghai, China, and its wholly owned affiliate, Xinhua Financial Network Limited. That affiliate provided information products about Chinese financial markets, including ratings, news and investor relations.
The indictment in the case charged three people, Shelly Singhal, Loretta Bush and Dennis Pelino, with participating in a scheme to defraud the U.S. Securities and Exchange Commission through a series of undisclosed and disguised related-party transactions and insider trading that generated proceeds exceeding $50 million. The indictment reads like a typical U.S. securities fraud case except for one thing: It does not expressly charge any violations of U.S. securities laws, including failure to report related-party transactions or insider trading. Rather, the indictment charges these individuals with mail fraud, in violation of 18 U.S.C. §§ 2 and 1341, and false statements, in violation of 18 U.S.C. §§ 2 and 1001 – a choice of charges that was undoubtedly driven by the foreign status of the company in question.
In considering motions to dismiss the false statement counts of the indictment, Chief Judge Royce Lamberth observed that the false statement statute encompasses two kinds of misconduct – affirmative misstatements and concealment.
After finding that the indictment only included allegations of concealment, Chief Judge Lamberth then noted that criminal liability for concealment under the false statement statute exists only if there is a duty to disclose. The court then noted the absence of any duty to disclose that applied to this foreign company under U.S. law. While SEC regulations require that foreign companies disclose to the SEC certain information required to be disclosed to foreign regulators, the Court noted the absence of any allegation in the indictment that foreign law imposed an obligation to disclose the particular information that formed the basis for the false statement charges in this indictment. Given the absence of a duty to disclose, the court dismissed the false statement counts of the indictment.
It is not clear from the court’s opinion whether the government may be able to resurrect the false statement charges by alleging more clearly the existence of a duty to disclose under foreign law that would trigger a concomitant duty for disclosure to U.S. authorities in this case. Certainly, the decision must be viewed as a caution for enforcement authorities about the boundaries of extraterritorial application of U.S. law. There is no question that U.S. enforcement can reach many foreign companies and transactions, but that power has its limits.
Federal Criminal (Other)
We recently blogged about the recent decision of the U.S. Court of Appeals for the 11th Circuit in Securities and Exchange Commission v. Goble, 2012 WL 1918819 (11th Cir. May 29, 2012). There, we discussed the appeals court’s limitation on the reach of the concept of “securities fraud” under Section 10(b) of the Exchange Act and Rule 10b(5).
Another aspect of that case is also quite noteworthy and may have an impact on many corners of white-collar criminal law. In the Goble case, the court vacated an injunction that simply tracked the language of the securities laws in defining what the defendant was barred from doing. This kind of injunction is often termed an “obey-the-law” injunction.
The court wrote: “Goble correctly identifies these paragraphs as an “obey-the-law” injunction and is rightly skeptical of their validity. As the name implies, an obey-the-law injunction does little more than order the defendant to obey the law. We have repeatedly questioned the enforceability of obey-the-law injunctions not only in the context of securities cases but other cases as well.”
The appeals court pointed out that any federal court injunction must comply with the requirements of Rule 65 of the Federal Rules of Civil Procedure:
“Glaringly absent from the SEC’s brief is any discussion explaining why the district court’s injunction complied with the requirements of Rule 65. Rule 65(d)(1) states that ‘Every order granting an injunction and every restraining order must: (A) state the reasons why it issued; (B) state its terms specifically; and (C) describe in reasonable detail — and not by referring to the complaint or other document—the act or acts restrained or required.’ Fed. R. Civ. P. 65(d)(1). We have never said that a court may simply ignore these requirements because it is entering an injunction in a securities case.”
The key issue that the appeals court pointed out is that an injunction requires a certain amount of specificity, so that the defendant is fully on notice about what he can or cannot do under the order.
“Plainly,” the court wrote, “Goble would need to look beyond the four corners of the district court’s injunction in order to comply with its strictures. The mere cross-reference to provisions of the United States Code and Code of Federal Regulations does not specifically describe the acts addressed by the injunction. And, without a compendious knowledge of the codes, Goble has no way of understanding his obligations under the injunction.”
This decision may open up new lines of argument for defendants in white-collar cases, and not only in securities actions. Since broad injunctions that do little more than track a statutory prohibition can be subject to challenge, defense attorneys may be able to argue convincingly that an injunction should be more specific and more narrowly tailored to a defendant’s past conduct.
Yet another shoe has dropped in the long-running investigation and the series of prosecutions arising from allegations of insider trading in the stocks of Goldman Sachs and other companies. In May 2011, Raj Rajaratnam was convicted of insider trading and ultimately sentenced to 11 years in prison. On June 15, 2012, Rajat Gupta, a former director at Goldman Sachs, was convicted in the U.S. District Court for the Southern District of New York on four of six counts of an indictment that charged him with a conspiracy that included feeding inside tips to Rajaratnam in September and October 2008 about developments at Goldman Sachs.
As with the trial of Rajaratnam, the key pieces of evidence against Gupta appear to have been wiretapped conversations. The four charges on which Gupta was convicted all related to trades in support of which the government presented recorded conversations as evidence (though the government played only three recordings in the Gupta trial). The jury acquitted Gupta of two charges arising from other trades for which the government presented no such evidence. The jury clearly was influenced by hearing Rajaratnam on the recordings referring to his source on the Goldman Sachs board – powerful evidence that gave increased persuasive power to the government’s reliance on phone records showing substantial contacts between the two men.
Rajaratnam has appealed his conviction to the U.S. Court of Appeals for the Second Circuit, and one significant issue he has raised is whether the government improperly sought authority to wiretap the conversations that were the cornerstone of his conviction. That ruling will be very significant, both because a decision in Rajaratnam’s favor is likely to result in a reversal of Gupta’s conviction as well, and because the Second Circuit’s ruling may have a major impact on the future ability of prosecutors to continue to use wiretaps against white-collar targets.
While Gupta is likely to receive a prison sentence for his conviction, it seems likely that he will receive a lower sentence that Rajaratnam, who engaged in the trades in question and reaped the benefits of those trades – estimated at trial to have generated $16 million in gains or in avoided losses from Rajaratnam’s fund. While prosecutors may seek a higher sentence based on acquitted conduct, Gupta’s advisory range calculated under the U.S. Sentencing Guidelines may be as much as eight years in prison. There is also a significant question whether Judge Jed Rakoff, who has expressed frustration with what he calls “the guidelines’ fetish with abstract arithmetic,” will sentence Gupta to a shorter term than the one calculated under the Guidelines.
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.