It’s been four years since the financial crisis crippled the American economy. And still, not a single prosecution of a high ranking Wall Street executive or major financial firm. Fraud played a major part in the meltdown.
Yet, the Justice Department hasn’t gotten the job done. Why not?
One answer – the revolving door. Young lawyers work for the Justice Department for a couple of years, then join a major corporate law firm to defend corporate criminals, then move back to the Justice Department to prosecute corporate criminals.
This revolving door answer is dismissed those who play the game. But many outside the game believe it’s an answer we can hang our hat on.
Add to that group Peter Schweizer. Remember Schweizer? He’s the guy who wrote a best selling book that looked at Congressional insider trading – Throw Them All Out – went on 60 Minutes, and triggered an uproar that resulted earlier this year in Congress passing and President Obama signed into a law that aims to ban insider trading on Capitol Hill.
Well, now Schweizer and his Government Accountability Institute have released a report that details the revolving door between Obama’s Justice Department and private white collar criminal defense law firms.
The title of the report – Justice Inaction – The Department of Justice’s Unprecedented Failure to Prosecute Big Finance.
Schweizer chops at the top – Attorney General Eric Holder, who was a partner at Covington & Burling before being named Attorney General by Obama.
“Selecting a white-collar defense attorney from Covington as Attorney General over a more fiery prosecutor, such as Patrick Fitzgerald – whose investigations led to the arrest of Illinois governor Rod Blagojevich – may have sent a subtle signal to the financial community,” Schweizer writes. “Covington currently represents Wells Fargo and J.P. Morgan Chase, each of which alone represents at least one percent of the firm’s total revenue, according to court disclosures. Covington also represents Bank of America, Citibank, Deutsche Bank, Goldman Sachs, ING, Morgan Stanley, UBS, and Wilmington Trust – many of which the Department has investigated for potential criminal activity.”
Next up – Lanny Breuer. “Breuer co-chaired the white-collar defense and investigations unit at Covington with Holder before taking his role as the director of the Criminal Division at the Justice Department,” Schweizer wrote. “His counselor at Justice was another colleague from Covington, Steve Fagell, who was responsible for coordinating the Criminal Division’s work with the Financial Fraud Enforcement Task Force. Fagell returned to Covington in 2010 to rejoin the firm’s white-collar defense practice.”
But it’s not just Holder and Breuer.
“Attorney General Holder, Associate Attorney General Thomas Perrelli, Associate Attorney General Tony West, and Deputy Associate Attorney General Karol Mason all came to the Department from prestigious white-collar defense firms, where they represented the very financial institutions the Department is supposed to investigate,” the report finds.
The report found that Obama’s Financial Fraud Enforcement Task Force has been too busy to prosecute big finance.
“It has instead pursued small operators, sometimes absurdly small ones,” the report found. “None are connected to the large financial institutions where government reports have alleged so much fraud has taken place,” the report found.
The report quotes Ray Brescia, a law professor at the University of Albany.
Brescia fears that the lack of federal enforcement following the financial crisis may only incentivize cronyism.
“Law enforcement’s most recent attempt at uncovering and prosecuting bank misconduct in the lead up to and fallout from the financial crisis has gotten moving in only fits and starts,” Brescia said. “These forces – public disenchantment with the banks, coupled with weak law enforcement – are a toxic mix. They will fail to prevent future misconduct. What’s worse, they may, in fact, encourage it.”
The report concludes where it began – with conflicts.
“The Department of Justice is tasked with equitably enforcing the rule of law, but conflicts of interest may explain the Department’s reticence to hold Wall Street accountable,” Schweizer writes. “The absence of financial prosecutions, coupled with the fact that enforcement come from the very firms that defended those institutions, indicates that our bureaucracy failed both ‘to control the governed’ and ‘to control itself.’”